Sector market: from 20220314 to 20220318, the national defense and military industry sector (SW) fell 1.62%, ranking 14th among 31 primary industries. From the beginning of the year to the closing of the last trading day of this week, the national defense industry sector (SW) fell 21.96%, ranking 31st among 31 primary industries.
Industry Valuation: at present, the pe-ttm valuation of the defense and military industry sector (SW) is 56.21, with a 2-year quantile of 10.31% and a 5-year quantile of 11.02%, which is at a low position.
Stock market: the stocks with the highest growth this week are North Chemical Industries Co.Ltd(002246) (+ 31.95%), Tianjin 712 Communication & Broadcasting Co.Ltd(603712) (+ 9.28%), Beijing Unistrong Science & Technology Co.Ltd(002383) (+ 8.92%), Sichuan Chengfei Integration Technology Corp.Ltd(002190) (+ 8.55%), Guangdong Ganhua Science & Industry Co.Ltd(000576) (+ 7.25%). The stocks with the highest growth since the beginning of the year are North Chemical Industries Co.Ltd(002246) (+ 46.03%), Beijing Unistrong Science & Technology Co.Ltd(002383) (+ 9.67%), Allwin Telecommunication Co.Ltd(002231) (+ 8.96%), Guangdong Ganhua Science & Industry Co.Ltd(000576) (+ 4.83%), Red Phase Inc(300427) (+ 3.23%).
Industry dynamics: according to the analysis, the j-10ce fighter aircraft exported by China to Pakistan Air Force also adopts the domestic turbofan-10b “Taihang” engine, which has stable and reliable performance and plays a supporting role in improving the level of military aircraft industry chain. The chairman of the Central Military Commission Xi Jinping recently signed an order to issue the “Interim Provisions on the supervision and administration of military equipment procurement contracts”, which will go into effect on March 20, 22, and will help to improve the quality and efficiency of equipment procurement. Industry data: in terms of shipbuilding, Borneo’s sea freight index (BDI) fell slightly this week, and China’s export container freight index (CCFI) also fell slightly; Shipbuilding steel prices fluctuated slightly; In February, the new shipbuilding price index remained at a high level and rose slightly. In terms of military raw materials, the price of sponge titanium remained high and the price of acrylonitrile decreased slightly.
Industry Week view: the national defense and military industry sector has experienced a significant correction since the beginning of 2022. There has been a phased repair market since mid February, and it will be corrected again after March. In the first half of this week, there was a correction following the market trend, the market rebounded in the second half of this week, and the military industry sector was slightly repaired. We believe that there has been no fundamental change in the fundamentals of the military industry. From the perspective of the 2022 military budget, the trend of vigorous development of national defense construction is expected to continue. The current sector valuation is at a low position from the two-year and five-year dimensions, and there is growth potential in the future. In the follow-up, it is suggested to track the estimation of related party transactions of each main engine manufacturer in this year, as well as the changes of accounts receivable, contract liabilities, inventory and other items in the annual report of listed companies.
Investment suggestion: with the improvement of China’s comprehensive national strength and the rapid growth of the national economy, it is necessary for China to strengthen national defense construction for a long time in the international environment of big country game. It is suggested that the investment in the military industry should follow the three main lines of military electronics, new military materials and the reform of military state-owned enterprises. (1) Main line of new military materials, recommend Weihai Guangwei Composites Co.Ltd(300699) , and pay attention to Gaona Aero Material Co.Ltd(300034) ; (2) Main line of military electronics, recommended China Zhenhua (Group) Science & Technology Co.Ltd(000733) , Avic Jonhon Optronic Technology Co.Ltd(002179) , Zhuzhou Hongda Electronics Corp.Ltd(300726) ; (3) The main line of the reform of state-owned military enterprises, recommended China Cssc Holdings Limited(600150) , Glarun Technology Co.Ltd(600562) . Recommendation of other targets Suzhou Sushi Testing Group Co.Ltd(300416) .
Risk analysis: the risk of the impact of changes in the international political situation on the development of the military industry; The risk of intensified competition in the defense equipment market; The risk that the development progress of defense equipment is less than expected.
