The reform of state-owned enterprises has achieved phased results. 70% of the scheduled tasks of state-owned enterprise reform will be successfully completed in 2021. Hao Peng, party secretary and director of the SASAC of the State Council, said that according to the requirements of the central economic work conference, the three-year action task of state-owned enterprise reform in 2022 must be fully completed.
Under the equity incentive, the enterprise’s revenue is better. From 2010 to March 2022, the A-share listed companies of the military industry group launched 48 equity incentive plans (three of which have not been officially implemented), involving 35 listed companies, with a total incentive number of more than 34000 people. The companies that have launched equity incentive accounted for 37% of the total A-share listed companies of the military industry group. According to statistics, more than half of the A-share listed companies under the military industry group had a revenue growth rate of more than 10% in the year when the equity incentive was implemented and in the next two years, and more than 80% had a positive revenue growth rate; One year after the implementation of equity incentive, the revenue growth rate of Companies Implementing equity incentive is positive. Stimulated by equity incentive, the company’s revenue capacity has been steadily improved.
Industry investment returns to fundamentals logically. The investment logic of the industry has changed significantly. In the later period of the 12th Five Year Plan, stimulated by the expectation of military reform, the prosperity of the industry reached the peak, and then the speculation expectation burst, and the valuation of the sector cooled rapidly. By the 13th Five Year Plan period, after the theme hype was broken, the valuation began to be gradually digested. Some military industrial groups began to promote the listing of their high-quality enterprises, improve the asset securitization rate of the group, and open multiple rounds of equity incentive plans to stimulate performance growth. Entering the “14th five year plan” stage, the industry has entered a critical period for the upgrading of national defense equipment. At the same time, it is also a critical period for connecting 2035 to realize the modernization of national defense and the army and the long-term goal of building the people’s army into a world-class army by the middle of this century. The performance of the industry is released and the prosperity is rising. So far, the investment logic of the national defense industry has completed the transformation from the original “theme speculation” to fundamentals.
Investment advice. This year is the “closing year” of the reform of state-owned enterprises. The reform of state-owned enterprises in military industry is expected to be further accelerated, which is expected to activate the vitality of military enterprises. The investment logic of superimposed industries has changed from “hot spot driven” to “Fundamentals driven”; Subsequently, under the capacity expansion during the 14th Five Year Plan period, the industry is expected to usher in a long-term high boom. It is suggested to choose the core military assets of “long track + high prosperity”. It is suggested to pay attention to: Avic Shenyang Aircraft Company Limited(600760) ( Avic Shenyang Aircraft Company Limited(600760) . SH), Aecc Aviation Power Co Ltd(600893) ( Aecc Aviation Power Co Ltd(600893) . SH), Aecc Aero-Engine Control Co.Ltd(000738) ( Aecc Aero-Engine Control Co.Ltd(000738) . SZ), Avic Heavy Machinery Co.Ltd(600765) ( Avic Heavy Machinery Co.Ltd(600765) . SH), Xi’An Triangle Defense Co.Ltd(300775) ( Xi’An Triangle Defense Co.Ltd(300775) . SZ) Unigroup Guoxin Microelectronics Co.Ltd(002049) Unigroup Guoxin Microelectronics Co.Ltd(002049) .SZ）、 China Zhenhua (Group) Science & Technology Co.Ltd(000733) China Zhenhua (Group) Science & Technology Co.Ltd(000733) .SZ）、 Western Superconducting Technologies Co.Ltd(688122) Western Superconducting Technologies Co.Ltd(688122) .SH）、 Gaona Aero Material Co.Ltd(300034) Gaona Aero Material Co.Ltd(300034) .SZ）。
Risk tip: the number of new orders due to the decline of market demand is less than expected. The high R & D cost led to the decline of enterprise performance than expected. The price rise of upstream materials caused by the risk of Russian Ukrainian war. The implementation of equity incentive and asset securitization was not as expected, which affected the reform progress of military industry group.
