On the afternoon of March 17, the all army weapons and equipment procurement information network released the notice on the inclusion of market products in the list of electronic components. Main content: a certain department of the Chinese people’s Liberation Army has issued a notice on the inclusion of market products in the list of electronic components on the intranet of the military weapons and equipment procurement information network on March 17, 2022. Now we invite research and development units willing to engage in the supply of military electronic components to participate. The market is worried that the more open upstream supply and intensified competition will lead to the decline of enterprise profit margin. The military electronics sector fluctuated sharply on the 18th, Avic Jonhon Optronic Technology Co.Ltd(002179) , Zhuzhou Hongda Electronics Corp.Ltd(300726) , Beijing Yuanliu Hongyuan Electronic Technology Co.Ltd(603267) , Guizhou Space Appliance Co.Ltd(002025) closed down 5%, 5%, 4.1% and 1.3% respectively.
The chairman signed an order to issue the “Interim Provisions on the supervision and administration of military equipment procurement contracts”. Beijing, March 19, Xinhua reported that Xi Jinping recently, chairman of the Central Military Commission signed an order to issue the “Interim Provisions on the supervision and administration of military equipment procurement contracts”, which will come into force on March 20, 2022. The “Regulations” has 6 chapters and 35 articles, and defines the management system for the supervision and management of equipment procurement contracts in accordance with the general principle of “the CMC is in charge of the general department, the theater is in charge of the main war, and the services are in charge of the construction”; Strengthen supervision according to law, optimize and improve the systems and mechanisms such as supervision and management tasks, supervision and management agreements and supervision and management plans, and improve the effectiveness of the supervision and management of equipment procurement contracts; Adhere to quality first, comprehensively and systematically design the contents, processes and requirements of equipment procurement contract supervision and management, so as to ensure the delivery of qualified equipment to the army; Innovate the supervision and management mode, and adopt the combination of pre prevention, in-process management and post evaluation to promote the innovative development of equipment procurement contract supervision and management. This is also the third important regulation on military equipment recently signed by the president after the regulations on military equipment ordering in November 2021 and the regulations on military equipment test and appraisal in February 2022.
The boom expansion of the industrial chain is conducted in an orderly manner, and the value of sector stabilization and allocation is highlighted. Under the influence of market sentiment and other factors, the military industry sector experienced a sharp correction at the beginning of the year, and the logic of long-term boom expansion remained unchanged. The verification of advances received by downstream enterprises and the landing of large orders will be conducted in an orderly manner to the upstream and midstream along the industrial chain. During the “14th five year plan” period, the demand of supporting enterprises is large-scale and uncertain, and the performance of private leaders will be more flexible. The CSI military industry index is valued at 58 times, which is at the 15% quantile value of historical PE. We continue to be optimistic about the value of sector allocation under the current position.
Grasp the main line of aviation equipment investment, and military electronics has high independent and controllable growth. 1) The contract liabilities of the main engine factory + the verification of the advance payment, and the growth of the aviation industry chain will continue to be realized. The performance transmission is effective. From the main engine plant and engine system, to the body system and parts, and then to the upstream raw material sector, the whole industry chain has strong momentum and certainty. The main engine manufacturer pays attention to Avic Shenyang Aircraft Company Limited(600760) , Avic Xi’An Aircraft Industry Group Company Ltd(000768) , Jiangxi Hongdu Aviation Industry Co.Ltd(600316) , Avicopter Plc(600038) , Aecc Aviation Power Co Ltd(600893) ; The body system pays attention to Avic Electromechanical Systems Co.Ltd(002013) , China Avionics Systems Co.Ltd(600372) , Aecc Aero-Engine Control Co.Ltd(000738) , Beijing Beimo High-Tech Frictional Material Co.Ltd(002985) ; Aviation parts focus on Avic Heavy Machinery Co.Ltd(600765) , Wuxi Paike New Materials Technology Co.Ltd(605123) , Guizhou Aviation Technical Development Co.Ltd(688239) , Chengdu Ald Aviation Manufacturing Corporation(300696) ; Metal materials focus on Western Superconducting Technologies Co.Ltd(688122) , Fushun Special Steel Co.Ltd(600399) , Gaona Aero Material Co.Ltd(300034) , Jiangsu Toland Alloy Co.Ltd(300855) , etc. 2) The certainty of missile weapons and equipment benefits from actual combat military training. The independent control of military electronics in the field of high-end equipment brings high growth. We pay attention to Chengdu Tianjian Technology Co.Ltd(002977) , Chengdu Rml Technology Co.Ltd(301050) , Avic Jonhon Optronic Technology Co.Ltd(002179) , Guizhou Space Appliance Co.Ltd(002025) , China Zhenhua (Group) Science & Technology Co.Ltd(000733) , Beijing Yuanliu Hongyuan Electronic Technology Co.Ltd(603267) , Beijing Fjr Optoelectronic Technology Co.Ltd(688272) , etc.
Risk tip: the epidemic repeatedly affects the macroeconomic environment; Equipment R & D progress and procurement progress are less than expected; Military procurement prices fell; Industry competition intensifies.
