Key investment points
The valuation of defense and military industry is at the lowest point since 2014, and it is recommended to add it
In the recent market adjustment, the CSI national defense index has fallen by 45% since the beginning of the year. The current overall valuation (pe-ttm) is 38 times, which is the lowest since 2014. It is a good medium and long-term allocation opportunity. It is recommended to add national defense industry.
The "14th five year plan" for national defense and military industry has high certainty, and the "15th five year plan" will still have high growth
1) the "14th five year plan" for national defense and military industry has a high growth certainty: major orders for major products have been issued successively, and it is not ruled out that additional orders may be added in the future. The compound growth rate of terminal products such as military aircraft is more than 20%, and the growth rate of supporting industrial chains such as missiles / engines / informatization / raw materials is higher.
2) the national defense industry in the "15th five year plan" still has high growth: "war preparation" and "2027" are the objectives of the first stage of China's national defense construction; "Realizing the modernization of national defense forces in 2035" and "building a world-class army in the middle of this century" are the premise and barrier to ensure the long-term and stable development of the country. If China's GDP surpasses the United States to rank first in the world, it is expected that China's national defense strength will also reach the same level.
3) the arduous task of national defense construction in the next decade or even longer requires the industrial chain to improve quality and efficiency: "scale effect / equity incentive / small core large cooperation / pricing reform / large order + large prepayment" are the industry growth catalysts, and the operation efficiency of industrial chain companies will continue to improve
Under the influence of geopolitics and covid-19 epidemic, it highlights the resilience of national defense and military industry and has comparative advantages
1) the conflict between Russia and Ukraine has developed beyond expectations, the military expenditure of many countries has increased, and the world may enter a new round of arms expansion. Under the background of the direct impact of the war and the omni-directional blockade of Russia by the west, the fluctuation and impact of commodity prices were transmitted to the economic field. Under the background of intensified global political / economic fluctuations, the internal circulation of defense industry is high, and it is unlikely to be affected in the next few years.
2) the covid-19 epidemic situation is severe. Most military enterprises can be exempted from shutdown and have strong business resilience. Both upstream and downstream of the industrial chain do everything possible to ensure production and delivery. The performance is highly deterministic, and the horizontal comparison has a comparative advantage
12 word core logic of national defense and military industry: "endogenous extension, domestic demand, foreign trade, military and civil products"
1) endogenous: under the "century changing situation", the national defense industry has a high certainty of growth, "preparing for war / 2027 / building a strong national defense commensurate with the second largest economy" is the established direction, and the demand of the military industry is as firm as a rock
2) extension: the state promotes the reform of state-owned enterprises and requires "stimulating the vitality of state-owned enterprises" and "improving the efficiency of state-owned capital". In the next few years, the securitization of national defense assets and the reorganization and listing of core military products are expected to set off a new climax. We pay attention to the group reorganization process of China Shipbuilding Group / Aerospace Hi-Tech Holding Group Co.Ltd(000901) / China Electronics Technology / China Aviation Industry / Aerospace Science and industry / ordnance industry.
3) foreign trade: China's fighter / UAV / Trainer / tank are globally competitive. Recently, there have been frequent positive news in the field of military trade. The J-10 CE fighter has been exported for the first time, the foreign party has announced the order of L15 higher education aircraft, and the fc-31 stealth fighter has established the military trade office. In the future, if the global defense expenditure increases and Russia's export capacity may decline under Western sanctions, China's military trade market is expected to further open.
4) civil products: the conflict between Russia and Ukraine highlights the importance of independent control in important fields. In the future, while national defense and military industrial enterprises are based on the main business of military products, civil aviation large aircraft / civil aviation engines and other important civil products need to be controlled independently and accelerated.
At the current stage, it is suggested to add defense and military industry, and be optimistic about the missile / information / Aviation Development / military aircraft sub industry
1) main engine factory: Avic Xi'An Aircraft Industry Group Company Ltd(000768) , Aecc Aviation Power Co Ltd(600893) , Jiangxi Hongdu Aviation Industry Co.Ltd(600316) , Avic Shenyang Aircraft Company Limited(600760) , Inner Mongolia First Machinery Group Corporation Co.Ltd(600967) , China Cssc Holdings Limited(600150) .
2) raw materials and core matching: raw materials and core matching:: Aecc Aero-Engine Control Co.Ltd(000738) for the raw materials and core matching:: forthe raw materials and core supporting: forthe Western Superconducting Technologies Co.Ltd(688122) \ , Avic Heavy Machinery Co.Ltd(600765) , Chengdu Leejun Industrial Co.Ltd(002651) , Wuxi Paike New Materials Technology Co.Ltd(605123) , Guizhou Aviation Technical Development Co.Ltd(688239) , Wuxi Hyatech Co.Ltd(688510) , Anhui Yingliu Electromechanical Co.Ltd(603308) , Jiangsu Toland Alloy Co.Ltd(300855) , Xi'An Bright Laser Technologies Co.Ltd(688333) , etc.
3) missile and informatization: Unigroup Guoxin Microelectronics Co.Ltd(002049) , Hubei Feilihua Quartz Glass Co.Ltd(300395) , Fujian Torch Electron Technology Co.Ltd(603678) , China Zhenhua (Group) Science & Technology Co.Ltd(000733) , Chengdu Zhimingda Electronics Co.Ltd(688636) , Wuhan Guide Infrared Co.Ltd(002414) , Zhejiang Dali Technology Co.Ltd(002214) , China Marine Information Electronics Company Limited(600764) .
Risk tips: 1) the rhythm of equity incentive and asset securitization is lower than expected; 2) the delivery progress of important products is lower than expected
