Key investment points:
Market review: as of April 22, 2022, Shenwan defense industry fell 3.02% this week, outperforming the CSI 300 index by 1.17 percentage points and ranking 12th among Shenwan 31 industries; Shenwan defense and military industry fell 11.36% this month, 6.40 percentage points lower than the Shanghai and Shenzhen 300 index, ranking 27th among Shenwan 31 industries; Shenwan defense and military industry sector has fallen 32.01% year to date, 13.24 percentage points lower than the Shanghai and Shenzhen 300 index, ranking 30th among Shenwan 31 industries.
As of April 22, 2022, the performance of Shenwan national defense and military industry sector was poor this week. From the performance of the last week, the aviation equipment sector had the least decline, down 2.10%. The performance of other sectors was as follows: the military electronics sector fell 2.38%, the aerospace equipment sector fell 4.61%, the ground military equipment sector fell 4.78%, and the navigation equipment sector fell 6.05%.
Zhou’s view of the defense industry: after the callback since the beginning of the year, the current industry has a certain cost performance. From the performance data recently released by military enterprises, the performance of most middle and upper reaches enterprises has achieved high growth, the contract liabilities of most downstream main engine plants have increased significantly year-on-year, the prosperity of the industry is still good, and the countercyclical attribute of the industry is prominent.
The development of the situation in Russia and Ukraine has further exacerbated the factors of global instability. In the face of the uncertainty caused by competition among major powers, all countries have begun to strengthen their own armaments or increase their national defense budgets. A new round of arms race has begun, and it is expected that the purchase orders of China and foreign countries will increase significantly. This year is the “closing year” of the reform of state-owned enterprises. The reform of state-owned military enterprises is expected to further accelerate and is expected to activate the vitality of military enterprises. Long term optimistic about the high prosperity of the industry under the demand for equipment upgrading during the 14th Five Year Plan period; From the perspective of usage, with the increase of actual training times, the loss of trainer aircraft and the replenishment of missile inventory are increased. We are optimistic about the aviation industry chain and the missile industry chain with high consumables. On the other hand, we are optimistic about the transfer and transformation of aerospace technology achievements to economy and society, the development of Beidou industrial chain under aerospace industry services and the Internet of things, and the development of special chips under the new round of digital currency reform. Suggestions on the subject matter: Aecc Aero-Engine Control Co.Ltd(000738) ( Aecc Aero-Engine Control Co.Ltd(000738) ), Xi’An Triangle Defense Co.Ltd(300775) ( Xi’An Triangle Defense Co.Ltd(300775) ), Avic Heavy Machinery Co.Ltd(600765) ( Avic Heavy Machinery Co.Ltd(600765) ), Unigroup Guoxin Microelectronics Co.Ltd(002049) ( Unigroup Guoxin Microelectronics Co.Ltd(002049) ), China Zhenhua (Group) Science & Technology Co.Ltd(000733) ( China Zhenhua (Group) Science & Technology Co.Ltd(000733) ), Western Superconducting Technologies Co.Ltd(688122) ( Western Superconducting Technologies Co.Ltd(688122) ), Gaona Aero Material Co.Ltd(300034) ( Gaona Aero Material Co.Ltd(300034) ), etc.
Risk warning: the number of new orders due to the decline of market demand is less than expected; High R & D costs lead to the decline of enterprise performance beyond expectations; The price rise of upstream materials caused by the risk of Russian Ukrainian war.
