Key investment points:
Market performance: this week, the Shanghai Composite Index rose or fell by – 1.25%, the gem index rose or fell by – 4.26%, and the CSI military industry rose or fell by – 5.88%. This week, CITIC defense industry index rose or fell by – 5.45%, ranking 27 / 30; This week, the Shenwan defense industry index rose or fell by – 4.87%, ranking 24 / 31.
Since the beginning of the year, the rise and fall of Shanghai composite index is – 11.77%, the rise and fall of gem index is – 25.95%, and the rise and fall of CSI military industry is – 30.48%. CITIC defense industry index rose or fell by – 30.16%, ranking 29 / 30; Shenwan defense industry index rose or fell by – 29.90%, ranking 30 / 31.
Sector Valuation: at present, the pe-ttm of CITIC defense and military industry index is 55.16, which is in the 1.15% quantile of the past five years. The pe-ttm of Shenwan national defense industry index is 52.00, which is in the 0.25% quantile of the past five years. The safety margin of the military industry sector is obvious.
Latest industry view: entering the intensive disclosure period of annual report and first quarter report, the high growth of the industry has been continuously verified. The military industry has good fundamentals and long-term certainty. However, due to the low transparency of the military industry, the market is relatively conservative about the growth rate and sustainability of performance. With the gradual disclosure of the annual performance report of 2021 and the first quarter report of 2022, the high performance growth of military enterprises is expected to be realized, and the prosperity of the industry will be further verified. 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.
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.
