Current investment tips:
The prosperity of the military industry is determined, and the Q1 performance is expected to increase by 25.7% – 29.1% year-on-year in 2022. We selected 36 key targets distributed in the upstream and downstream of the military industry chain. The current total market value is 1123.9 billion yuan, accounting for 61.8% of the total market value of the constituent stocks of Shenwan national defense and military industry index. The 36 key target companies in the military industry had a high base in Q1 last year, but benefited from the strong demand in the downstream. We expect the performance of 2022q1 to be about 6.277-6.445 billion yuan, with a year-on-year increase of 25.7% – 29.1%, maintaining steady growth.
Benefiting from the acceleration of military electronic information construction and domestic substitution of raw materials, the Q1 performance of upstream electronic components and high-end materials in 2022 is expected to increase by 25.4% – 27.4% and 25.0% – 31.6% respectively year-on-year. Benefiting from the construction of military electronic informatization in the 14th five year plan, the electronic components sector will achieve rapid growth in performance throughout the year. Looking ahead, with the continuous release of downstream aviation and aerospace demand, electronic components will grow rapidly, and Q1 performance is expected to increase by 25.4% – 27.4%. Benefiting from the high volume of new machines and the demand for localization substitution, the high-end raw material sector such as carbon fiber and titanium alloy is expected to maintain high growth. The Q1 performance of the high-end raw material sector is expected to increase by 25.0% – 31.6%, of which Baoji Titanium Industry Co.Ltd(600456) disclosed that the Q1 performance increased by 87.0% – 113.0% year-on-year.
Benefiting from the large amount of downstream demand and the continuous signing of large orders, the Q1 performance of the midstream subsystem and structural parts sector in 2022 is expected to increase by 18.6% – 21.7% and 52.7% – 57.5% respectively year-on-year. Benefiting from the large amount of downstream demand, the midstream subsystem takes the lead in preparing for production, and the performance is expected to grow steadily. The Q1 performance is expected to grow by 18.6% – 21.7%; Benefiting from the continuous landing of large Aerospace orders in the downstream, the scale effect of the midstream structural parts sector is prominent, and the performance is expected to maintain high growth. The Q1 performance is expected to increase by 52.7% – 57.5%, of which Wuxi Paike New Materials Technology Co.Ltd(605123) , Guanglian Aviation Industry Co.Ltd(300900) disclosed that the Q1 performance increased by 88.0% and 647.3% – 920.9% respectively year-on-year;
With the release of demand and the improvement of domestic substitution superposition management, the Q1 performance of downstream main engine manufacturers is expected to increase by 26.1% – 28.0% year-on-year.
The positioning and products of major main engine manufacturers are different, and the urgency of the military’s demand for each product is different, resulting in different performance release time points of downstream main engine manufacturers, and the year-on-year growth rate of performance is also relatively stable. Looking forward to the future, with the large volume of new machines and the improvement of domestic substitution superposition management, we expect the downstream main engine manufacturers to enter the performance explosion period one after another, and the Q1 performance is expected to increase by 26.1% – 28.0%.
Large orders continue to be signed + equity incentive expectations, the prosperity of the military industry is determined, and it is expected to continue to rise. The performance of some key stocks in 21 years is lower than expected, but it brings certainty and flexibility to the performance in the next one to two years; Most links of the industrial chain need to determine the new annual production schedule in the first quarter, and large orders are expected to be signed continuously; With the amendment of the articles of association or the completion of share repurchase, combined with the resumption experience of leading companies, the equity incentive of some key military companies is expected to make a breakthrough and help the release of enterprise performance.
“Three main lines” grasp the investment opportunities of national defense and military industry in 2022. Main line 1: Aviation Military Aircraft continue to be in large quantities, superimpose localization substitution, and promote the development of the whole industry chain of aviation development; Main line 2: main engine manufacturers and primary suppliers benefit from the large volume of new machines, the transformation of old machines and domestic substitution, and are expected to enter the stage of rapid growth in the future; Main line 3: with the acceleration of the process of military electronic informatization and the independent and controllable traction of domestic substitution demand, the main body of China’s military chips and electronic components is expected to benefit. At the same time, the vast civil space of electronic supporting products gives birth to long-term demand.
Target recommendation: elastic combination ( Avic Shenyang Aircraft Company Limited(600760) , Aecc Aviation Power Co Ltd(600893) , Avic Xi’An Aircraft Industry Group Company Ltd(000768) ) + determined combination ( Avic Jonhon Optronic Technology Co.Ltd(002179) + Western Superconducting Technologies Co.Ltd(688122) + Xi’An Triangle Defense Co.Ltd(300775) ). In addition, attention: Avicopter Plc(600038) , Avic Electromechanical Systems Co.Ltd(002013) ; The engine industry chain, such as the industrial chain of the engine industry chain, such as the Aecc Aero-Engine Control Co.Ltd(000738) \ Missile electronics industry chain, such as Chengdu Rml Technology Co.Ltd(301050) , Guizhou Space Appliance Co.Ltd(002025) , Beijing Yuanliu Hongyuan Electronic Technology Co.Ltd(603267) , Fujian Torch Electron Technology Co.Ltd(603678) , China Zhenhua (Group) Science & Technology Co.Ltd(000733) , Zhuzhou Hongda Electronics Corp.Ltd(300726) ; Carbon fiber composite industry chain, such as Avic Aviation High-Technology Co.Ltd(600862) , Weihai Guangwei Composites Co.Ltd(300699) , Sinofibers Technology Co.Ltd(300777) , etc.
Risk warning: purchase price fluctuation in different links of the value chain; Orders from downstream customers are less than expected; The VAT policy may change.
