Key investment points:
Market performance. This week, the Shanghai Composite Index rose or fell by + 0.13%, the gem index rose or fell by + 1.81%, and the CSI military industry rose or fell by - 1.71%. This week, CITIC defense industry index rose or fell by - 1.50%, ranking 14 / 30; This week, the Shenwan defense industry index rose or fell by - 1.62%, ranking 14 / 31.
Year to date, the Shanghai Composite Index rose or fell by - 6.32%, the gem index rose or fell by - 18.32%, and the CSI military industry rose or fell by - 21.83%. CITIC defense industry index rose or fell by - 22.51%, ranking 30 / 30; Shenwan defense industry index rose or fell by - 21.96%, ranking 31 / 31.
Sector valuation. At present, the pe-ttm of CITIC defense and military industry index is 60.79, which is at the quantile of 16.86% in the past five years. The pe-ttm of Shenwan national defense industry index is 56.21, 11.02% of the past five years. The safety margin of the military industry sector is obvious.
Latest industry perspectives:
The military industry sector has declined significantly since the beginning of the year, and the valuation is close to the bottom, with a good margin of safety. Any news appearing in the market may be interpreted as negative news, which has a great impact on investor confidence. We believe that neither the list of electronic components nor the Interim Provisions on the supervision and administration of military equipment procurement contracts signed and issued by Xi Jinping chairman should be understood as the introduction of new suppliers to promote a significant reduction in the price of military products, seriously compress the profits of military enterprises and affect the inherent pattern of the military industry. We believe that with the gradual entry of the annual report disclosure cycle, the military industry is still an industry with high prosperity.
With the increase of the relative and absolute value of military expenditure, the orders of main engine manufacturers are expected to continue to be signed. It is suggested to pay attention to the core barrier main engine manufacturers such as [ Avic Shenyang Aircraft Company Limited(600760) ] [ Avic Xi'An Aircraft Industry Group Company Ltd(000768) ].
The release of production capacity is expected to stimulate the prosperity of upstream industries. The aeroengine industry chain is one of the best quality tracks in the military industry sector and has good elasticity in the long run. As raw materials rise under the rising pressure of raw materials, in the first quarter, due to the rising pressure of raw materials, upstream raw material vendors like [ Fushun Special Steel Co.Ltd(600399) thechain is still a high-quality track with long slope and thick snow, so we continue to be optimistic about the development potential of the track in the later stage, It is suggested to pay attention to [ Avic Heavy Machinery Co.Ltd(600765) ] [ Wuxi Paike New Materials Technology Co.Ltd(605123) ] [ Xi'An Triangle Defense Co.Ltd(300775) ] [ Guizhou Aviation Technical Development Co.Ltd(688239) ].
Of course, there are new targets related to national defense informatization, which are replaced by the localization of existing equipment, and the proportion of informatization is gradually increasing. The track is not easily affected by the rise and fluctuation of raw material prices, and there is still good growth certainty at the current time point. We suggest paying attention to the relevant targets [ Unigroup Guoxin Microelectronics Co.Ltd(002049) ], [ China Zhenhua (Group) Science & Technology Co.Ltd(000733) ], etc.
Risk warning: the release and delivery of military orders are not as expected; Performance growth is less than expected; The reform of state-owned enterprises did not advance as expected.
