Market in recent week
Defense industry (Shenwan) index (- 7.47%), industry (Shenwan) ranking (30 / 31); Shanghai Composite Index (- 1.65%), Shenzhen Component Index (- 3.46%) and gem index (- 6.80%); Top five increases: Chengdu Tianjian Technology Co.Ltd(002977) (+ 6.18%), Hunan Tyen Machinery Co.Ltd(600698) (+ 5.36%), Taihai Manoir Nuclear Equipment Co.Ltd(002366) (+ 4.33%), Beijing Watertek Information Technology Co.Ltd(300324) (+ 3.90%), Chengdu Xiling Power Science & Technology Incorporated Company(300733) (+ 3.34%); Top five declines: Haohua Chemical Science & Technology Corp.Ltd(600378) (- 20.93%), Westone Information Industry Inc(002268) (- 16.73%), Gaona Aero Material Co.Ltd(300034) (- 16.57%), Western Superconducting Technologies Co.Ltd(688122) (- 16.22%), Aecc Aero-Engine Control Co.Ltd(000738) (- 16.21%).
Important events and announcements
On January 1, Guanglian Aviation Industry Co.Ltd(300900) announced that the company plans to carry out equity incentive and plans to grant 2.8 million shares to incentive objects, accounting for about 1.33% of the total share capital of the company. Among them, 2241000 shares were granted to 150 people for the first time, accounting for about 1.07% of the total share capital, and the grant price was 17.24 yuan / share.
On January 4, the general secretary of the CPC Central Committee, the president of the state and the chairman of the Central Military Commission Xi Jinping 4 signed the order No. 1 of the Central Military Commission in 2022 and issued a training mobilization order to the whole army.
On January 4, Beijing Beimo High-Tech Frictional Material Co.Ltd(002985) announced that in order to promote the application of China Civil Aviation PMA parts, i.e. domestic carbon composite brake discs, HNA Aviation Technology Co., Ltd. and Xiangpeng aviation jointly established a project team to carry out the engineering application evaluation of PMA carbon composite brake discs from qualified manufacturers in China. The carbon carbon composite brake disc of the company has passed the examination, verification and evaluation, and a ten-year aviation material procurement and supply agreement has been signed, which will take effect from January 1, 2022.
On January 5, Aerospace Hi-Tech Holding Group Co.Ltd(000901) group held a 2022 model work meeting, which pointed out that the group company plans to arrange more than 40 space launch missions in 2022, and will complete six major manned space missions, including two launches of cargo spacecraft, two launches of Shenzhou spacecraft and experimental module I and II, as well as on orbit rendezvous and docking, out of module activities and spacecraft return missions, so as to fully build the space station; The first flight of the long march 6A carrier rocket was completed.
On January 6, Guangzhou Haige Communications Group Incorporated Company(002465) announced that Haihua electronics, a wholly-owned subsidiary of the company, recently received the letter of acceptance. Haihua electronics became the bid winner of multiple bid sections of the sub project of “terrestrial digital TV 700 MHz frequency migration project” of China Radio, film and television design and Research Institute, with a total bid winning amount of 357 million yuan.
On January 6, Xi’An Tian He Defense Technology Co.Ltd(300397) announced that the company plans to increase its wholly-owned subsidiary Tianhe Tengfei by 230 million yuan with its own funds, so as to further enhance Tianhe Tengfei’s business development ability and financial strength. After the capital increase, the company still holds 100% of its equity.
On January 6, Weihai Guangwei Composites Co.Ltd(300699) announced that the company was recognized as the first batch of high-tech enterprises in Shandong Province in 2021. Since it obtained the qualification of high-tech enterprise, it can enjoy the preferential policy of high-tech enterprise income tax for three consecutive years (2021-2023), that is, the enterprise income tax shall be paid at the tax rate of 15%. On January 7, Beijing Starneto Technology Co.Ltd(002829) announced that the company plans to raise no more than 750 million yuan through non-public offering. After deducting the issuance expenses, it plans to be used for UAV industrialization projects, UAV System Research Institute projects and supplementary working capital.
On January 8, Wuhan Guide Infrared Co.Ltd(002414) announced that the company recently received the letter of acceptance of two types of photoelectric system products.
Investment advice
I. core view
In the first week of the year, the military industry fell by 7.47%, the second lowest in the industry. For a while, there were voices of doubt, and there were many negative, negative and irrational interpretations. In the market, there are several aspects:
① power equipment (carbon neutralization) and military industry led the decline;
② the leading stocks were mostly “white horses” in the industry with high consensus and forming a “group”, focusing on military materials and military electronics, such as Gaona Aero Material Co.Ltd(300034) (- 16.58%), Western Superconducting Technologies Co.Ltd(688122) (- 16.23%), Guizhou Space Appliance Co.Ltd(002025) (- 15.85%), Zhuzhou Hongda Electronics Corp.Ltd(300726) (- 15.49%), Fushun Special Steel Co.Ltd(600399) (- 14.41%) and Avic Heavy Machinery Co.Ltd(600765) (- 12.60%);
③ at the same time, the decline of main engine plants is generally large, such as Aecc Aviation Power Co Ltd(600893) (- 11.47%), Avic Xi’An Aircraft Industry Group Company Ltd(000768) (- 10.00%), Avicopter Plc(600038) (- 9.44%), Avic Shenyang Aircraft Company Limited(600760) (- 8.72%);
④ the trading volume of both industries and individual stocks has not been significantly enlarged.
Based on the above, we judge that although the short-term decline is large, it is more caused by the switching of market style and the position adjustment of those who are not firm in the industry. From the market performance, it is slightly loose, far from disintegration and collapse.
For the so-called “bad” factors, we should face up to and analyze whether they are previously unknown bad and whether they are really bad. If they are irrational decline and oversold caused by the cognitive deviation of short-term “bad”, isn\’t it another good opportunity for allocation? The fundamentals are both spear and shield. Only when we firmly grasp the spear and hold the shield can we have a bottom in our heart when falling, dare to choose the opportunity to attack, and adhere to independent thinking, judgment and persistence based on value, so as to obtain excess returns more easily. So, bad geometry, look at them one by one.
① style switching under the background of steady growth
New energy and military industry led the decline, while real estate and home appliances led the rise. Under the background of steady growth, there has been a trend of style switching recently. At the same time, the logic of comparative advantage of deterministic growth in the military industry has indeed weakened in the short term, which needs to be recognized. However, China is facing great downward pressure on the economy. Military industry is one of the few high boom tracks. It is called comparative advantage, so it is dynamic. The short-term weakening at a certain stage is inevitable, but sustained growth is certain. In the long run, the comparative advantage is still significant. Such hard strength is the real foundation.
② US liquidity tightening
Overseas liquidity is tightening, while China’s liquidity is easing. We believe that the impact of overseas liquidity tightening on A-Shares is short-term. Under the support of China’s loose liquidity, the overall market risk appetite is still conducive to the military industry.
③ factors affecting military price and profit margin
The profit margin decreased slightly and slowly due to the exchange of volume for price, but the profit still maintained rapid growth. This factor can be considered as pricein. In addition to the price factor, the military equipment procurement process, the use of socialized production capacity by main engine plants, and reducing the threshold for people to join the army all aim to improve the overall efficiency and capability of the military industry. Therefore, it is one-sided or even wrong to understand a certain policy or factor only as the restriction on the military industry and the reduction of profit level. All factors are to meet the unprecedented strong demand for military products, and the high-quality development of the industry will inevitably require a large number of high-quality supply subjects to give them a healthy and good growth environment and incentive space as much as possible, so as to ensure the stability, robustness and efficiency of the military industry supply chain.
From the above analysis, we can see that there are substantial “bad” factors at present. During the recent correction period, in fact, more “positive” are already in preparation (see the following for details):
① issue the mobilization order of the whole army at the beginning of the new year for five consecutive years;
② geopolitical events occur intensively;
③ the reform of state-owned enterprises has entered a crucial year;
④ the annual report performance forecast will be gradually disclosed to further enhance the confidence of the military industry;
5. Matching the performance and valuation, there is no bubble in the overall valuation of the industry.
Therefore, we judge that the current large-level adjustment is unrealistic, and has entered the cost-effective configuration range again.
1. The military training mobilization order has been issued for five consecutive years, resulting in rapid growth of military demand and strong certainty
Since 2018, Xi Jinping chairman has issued training mobilization orders to the whole army for five consecutive years, which fully reflects the importance he attaches to military construction, especially practical training. In the opening instruction issued in the first week of 2022, words such as “focusing on the change of science and technology”, “war training coupling” and “scientific and technological training” appeared for the first time, which fully reflected that the actual combat level is expected to be further improved, and the military’s demand for the “quality” and “quantity” of China’s weapons and equipment will maintain a rapid growth.
2. Geopolitical tension, and many countries accelerate the R & D or train loading of high-end weapons and equipment
The world is in a great change that has not been seen in a century, and geopolitical tensions. Recently, the border situation in Ukraine has been tense. Biden promised that the United States will make a “decisive response” when the border situation between Russia and Ukraine deteriorates. At the same time, Russia has sent peacekeeping forces to Kazakhstan, which is in a state of emergency, and many countries have accelerated the research and development or assembly of high-end weapons and equipment to deal with the changes in the international situation. The hypersonic missile tested by North Korea accurately hit the target 700 kilometers away; While developing electromagnetic guns to intercept hypersonic weapons, Japan signed a defense and security cooperation agreement with Australia. India launched its third “enemy Destroyer” nuclear submarine and introduced maritime reconnaissance and anti submarine combat aircraft.
3. Reform has become an important logic of military industry, but it is suggested to pay attention to some risks
Reform (asset securitization, asset injection, Institute restructuring, mixed ownership reform, employee stock ownership, equity incentive and other action measures, which can improve or expected to improve the asset quality and profitability of listed military companies), was once one of the important logics of the military industry and an important factor supporting the high valuation of the military industry in the past. For a long time, the capital market has been full of expectations for the asset restructuring of the military industry, and asset injection has also become an important logic for several market starts in history. However, in recent years, because the reform process is difficult to achieve overnight and it is difficult to realize the expectation of rapid cash in the capital market, the logic of reform seems to have been ignored by the market for a long time.
However, the reform has become the hot spot and focus of the military industry recently. The market performance is as follows:
① Phenix Optical Company Limited(600071) proposed asset restructuring, with the largest increase of nearly 340% since September 2021;
② Yunnan Xiyi Industrial Co.Ltd(002265) it is proposed to restructure the assets. Since December 6, 2021, the company has been connected to the 13th board;
③ Hunan Tyen Machinery Co.Ltd(600698) doubled since December 2021;
④ Changchun Yidong Clutch Co.Ltd(600148) , Inner Mongolia North Hauler Joint Stock Co.Ltd(600262) , Guizhou Guihang Automotive Components Co.Ltd(600523) , Shanghai Aerospace Automobile Electromechanical Co.Ltd(600151) , Gci Science & Technology Co.Ltd(002544) , Hebei Sinopack Electronic Technology Co.Ltd(003031) etc. achieved a large increase, focusing on military industrial groups such as CETC, weapons and military uniforms. Reform is a process of accumulating strength, a process from quantitative change to qualitative change. The reform of the military industry is the fundamental requirement to truly stimulate the internal vitality of the industry and quickly improve the efficiency of the industry. Therefore, we pointed out in the 2021 annual strategy report “smile after the three” armies “and the in-depth report” six questions of military industry “, The implicit option of asset injection in the military industry still exists: a large number of high-quality assets of the military industry group exist outside the body, and asset restructuring is still one of the important means of asset securitization of the military industry groups. The possibility of asset injection will always bring investment value that is difficult for other industries to have for the military industry. At the level of military industry reform, there are the following intensive events and factors recently:
① on December 3, 2021, Aerospace Ch Uav Co.Ltd(002389) equity incentive plan was approved by SASAC;
② Chengdu Spaceon Electronics Co.Ltd(002935) , Sun Create Electronics Co.Ltd(600990) etc. launch equity incentive;
③ on December 30, 2021, Costar Group Co.Ltd(002189) issued the second phase of restricted stock incentive plan;
④ on December 28, 2021, Aerosun Corporation(600501) announced the incentive plan for restricted shares in 2021;
⑤ on December 18, 2021, the state owned assets supervision and Administration Commission (SASAC) held a meeting of heads of central enterprises and pointed out that the “two profits and four rates” index of central enterprises next year should strive to achieve “two increases, one control and three improvements”, that is, the growth rate of total profits and net profits is higher than that of the national economy, control the asset liability ratio, and further improve the profit rate of revenue, the labor productivity of all employees and the investment intensity of R & D funds; In terms of mixed ownership reform, the next step is to focus on promoting the in-depth transformation of operation mechanism of mixed ownership enterprises and continue to explore differentiated management and control;
⑥ on December 28, 2021, Cssc Science & Technology Co.Ltd(600072) and China Shipbuilding Industry Group Power Co.Ltd(600482) two listed companies under China Cssc Holdings Limited(600150) group issued major asset restructuring announcements respectively. Among them, Cssc Science & Technology Co.Ltd(600072) is proposed to be placed in the wind power related assets of China Cssc Holdings Limited(600150) group, while China Shipbuilding Industry Group Power Co.Ltd(600482) will promote the integration of diesel engine business. Another listed company of China Cssc Holdings Limited(600150) group China Cssc Holdings Limited(600150) also issued relevant suggestive announcements on planning foreign investment and related party transactions.
⑦ recently, CETC issued the implementation opinions of China Electronics Technology Group Co., Ltd. on promoting the high-quality development of listed companies, highlighting the development orientation of the group’s holding listed companies as “the main position of industrial development, the main force of asset preservation and appreciation, the main channel of external financing and the main platform for system and mechanism innovation”;
⑧ recently, AVIC revised the guidance on mixed ownership reform in 2019 to form a brand-new guidance document “guidance on carrying out and deepening mixed ownership reform of AVIC”, pointing out that the focus of mixed ownership reform should be on changing the operating mechanism and improving the operating situation, rather than “mixing it up”, and should not be for the purpose of listing;
⑨ on December 21, 2021, Aerospace Hi-Tech Holding Group Co.Ltd(000901) group held a special promotion meeting on the three-year reform action of the group company. By the end of November, the overall progress of the three-year reform action of the group company had reached 76%, exceeding the 70% annual work target required by the SASAC of the State Council, and it is expected to reach 80% in 2021;
⑩ on December 23, 2021, China Aerospace Science and industry group held a leading group meeting on comprehensively deepening reform. The meeting pointed out that the group’s three-year reform action has made good progress, the annual work goal of “more than 70% has been completed ahead of schedule, and the main quantitative assessment indicators have been exceeded; It is estimated that by the end of 2021, the completion rate of the three-year action account of the group company’s reform can reach more than 80%;
Over the past year, (proposed) IPO: Hebei Sinopack Electronic Technology Co.Ltd(003031) (CETC), Guobo Electronics (CETC), Guizhou Zhenhua E-Chem Inc(688707) (Electronics), Yunlu Co., Ltd. (Aviation Development), Huaqiang Technology (military uniform), UAV (aviation industry), Zhenhua scenery (Electronics), etc; (proposed) asset restructuring: Cetc Energy Joint-Stock Co.Ltd(600877) (CETC), Cetc Digital Technology Co.Ltd(600850) (CETC), Phenix Optical Company Limited(600071) (CETC), Anhui Jiangnan Chemical Industry Co.Ltd(002226) (weapons), Yunnan Xiyi Industrial Co.Ltd(002265) (military equipment), etc; 2022 is the last year of the three-year action plan for the reform of state-owned enterprises. All military industrial groups have proposed to accelerate the implementation of the three-year action reform task, and improving the asset securitization rate is one of the key tasks. The logic of the reform of the military industry is real, and it is also happening and fulfilling rapidly. However, we also need to remind some precautions here:
① it is difficult to grasp the rhythm and progress of restructuring and securitization, and it is difficult to achieve it overnight. It is necessary to achieve “three reasons, three suitability and three non”, which refers to “implementing policies according to local conditions, industries and enterprises”; “Three appropriates” refers to “independence is appropriate, control is appropriate, and participation is appropriate”; Three no means “no matchmaking, no full coverage and no timetable”;
② under the registration system, independent listing rather than asset injection is a better choice in many cases. Therefore, the investment strategy risk of Bo restructuring and gambling injection increases, the implied option value of asset injection decreases, and the value of “shell” also shrinks significantly;
③ iconic stocks Phenix Optical Company Limited(600071) , Yunnan Xiyi Industrial Co.Ltd(002265) have a large short-term increase. If there is a correction in iconic stocks, it may affect other relevant stocks;
④ risk of reorganization failure;
⑤ the short-term increase is too large, and the overdraft injection is expected.
4. The annual report performance forecast will be gradually disclosed to further improve the confidence of the military industry. From this month, the annual report performance forecast will be gradually disclosed. From the third quarterly report and year-end orders, many listed companies in the military industry are likely to be happy with the 2021 annual report, which will further improve the confidence of the military industry and strengthen the market’s understanding of the value attribute of the military industry.
Take the aviation industry as an example. In the first three quarters, the aviation industry
