Investment Rating - The report maintains an "Overweight" rating for the defense and military industry, indicating a positive outlook compared to the overall market performance [23]. Core Insights - The defense and military sector is expected to see accelerated task deliveries in Q4, with a potential increase in orders towards the end of the year, serving as a catalyst for investment [3]. - Geopolitical uncertainties are driving demand for consumable military equipment and military trade, presenting significant investment opportunities [3]. - The report highlights a strong correlation between supply and demand in the global military trade market, particularly in the Middle East and Asia, which is expected to continue [3]. - Key investment areas include new main battle equipment, consumable weapons, military trade, and military intelligence [3]. - The report emphasizes the importance of monitoring the performance of specific stocks within the military sector, particularly those related to high-end combat capabilities and new quality combat forces [3]. Market Review - Last week, the Shenwan Defense and Military Index rose by 2.85%, while the CSI Military Leaders Index increased by 1.52%. In comparison, the Shanghai Composite Index rose by 1.4%, and the CSI 300 Index increased by 1.64% [4][11]. - The top five performing stocks in the defense and military sector were: - Saiwei Electronics (44.85%) - TeFa Information (34.07%) - Leike Defense (32.3%) - Aerospace Power (32.22%) - Zhongtian Rocket (21.6%) [11]. - Conversely, the bottom five performing stocks were: - Beihua Co. (-11.59%) - Guorui Technology (-4.84%) - Yaxing Anchor Chain (-3.56%) - Chenxi Aviation (-3.2%) - Aileda (-2.71%) [12]. Valuation Changes - The current PE-TTM for the Shenwan Military Sector is 77.60, indicating it is in the upper range historically, with a valuation percentile of 65.76% since January 2014 and 92.45% since January 2019 [12][13]. - The report notes a slight differentiation in valuations among sub-sectors, with aerospace and aviation equipment showing relatively high PE valuations since 2020 [12].

Group 1 - The 2025 Asian General Aviation Exhibition concluded with a total contract value exceeding 7 billion RMB, with 837 aircraft (sets) sold [1] - The exhibition attracted 75 international exhibitors from countries including the USA, Canada, Germany, the UK, and France, featuring renowned companies such as Bell Helicopter, Pilatus, and Daher [1] - Notable aircraft showcased included the latest Cavalon model from German Daher and the new SR series G7+ from American Cirrus Aircraft [1] Group 2 - The exhibition not only displayed aircraft hardware but also facilitated collaboration among upstream and downstream enterprises, accelerating the integration of the low-altitude economy industry chain [2] - A diverse matrix of eVTOL products was presented, highlighting the potential of low-altitude economy in urban commuting, intercity transportation, and emergency rescue scenarios, thus moving the industry from experimental stages to commercial implementation [2]

Investment Rating - The report maintains an "Outperform" rating for the defense and military industry [5] Core Insights - The establishment of the Commercial Space Administration by the National Space Administration signifies a dedicated regulatory body for the commercial space industry, which is expected to drive high-quality development and benefit the entire industry chain [2][37] - The low-altitude economy is entering a phase of accelerated commercialization, with significant policy support and new product development, indicating a promising growth trajectory [3][36] - The defense and military sector is projected to experience sustained growth due to the execution of backlog orders from the 14th Five-Year Plan and the introduction of new orders under the 15th Five-Year Plan [3][38] Summary by Sections Market Review - The defense and military index rose by 2.85% last week, ranking 14th among 31 primary industries [1][13] - The current PE (TTM) for the defense and military sector is 77.60 times, with aerospace equipment at 305.61 times and military electronics at 106.55 times [1][22] Key Recommendations - Recommended companies include: 1. Downstream manufacturers: AVIC Chengfei, Hongdu Aviation, AVIC Shenyang, AVIC Xifei 2. New military technologies: Lianchuang Optoelectronics, Guangqi Technology, Zhongjian Technology 3. Underwater equipment: Yaxing Anchor Chain, Zhongke Haixun, Changying Tong 4. Missile industry chain: Feili Hua, Guoke Military Industry, Zhongbing Hongjian 5. Military titanium materials: Western Superconducting 6. Electronic components: Hongyuan Electronics, Aerospace Electric [4][40][41][42][43][44][45][46] Industry Dynamics - The National Space Administration's action plan for commercial space development aims for a significant expansion of the industry by 2027, enhancing innovation and resource utilization [2][37] - The low-altitude economy is being bolstered by new regulations and infrastructure developments, with a focus on safety and efficiency in low-altitude flight activities [3][34][36]

Group 1: Overall Market Insights - The report highlights the focus on the Federal Reserve's potential interest rate cuts, liquidity recovery, and AI chip competition in December, predicting a volatile recovery in the US stock market with opportunities for low-cost investments [4][14][15] - Domestic PMI shows slight improvement, with attention on policy signals from the Political Bureau and Central Economic Work Conference, indicating a cautious but positive outlook for the A-share market [4][19][21] - The report anticipates a range-bound movement in the A-share market, with a focus on low-consumption sectors, price recovery cycles, and technology themes driven by industrial catalysts [4][22] Group 2: Key Stock Recommendations - The report lists ten key stocks, including Luxshare Precision (002475.SZ) in electronics, Rui Ming Technology (002970.SZ) in new energy, and Zhongmin Resources (002738.SZ) in non-ferrous metals, among others, with no specific ranking [5][12] - Luxshare Precision is expected to benefit from AI-enabled consumer electronics, with a projected revenue growth from 265.32 billion to 358.63 billion RMB from 2024 to 2026 [23][26] - Rui Ming Technology is positioned as a leader in commercial vehicle AI solutions, with revenue forecasts of 26.7 billion to 41.5 billion RMB from 2025 to 2027, driven by policy support and safety requirements [30][34] Group 3: Industry-Specific Insights - The electronics sector, particularly Luxshare Precision, is experiencing growth due to AI integration in consumer electronics, with significant revenue increases expected [23][24] - The storage market is recovering, with companies like Zhaoyi Innovation (603986.SH) benefiting from rising demand and prices for niche DRAM products, projecting revenues of 73.83 million to 107.37 million RMB from 2024 to 2026 [27][28] - The new energy sector, represented by Rui Ming Technology, is set for high growth due to increasing demand for intelligent driving solutions and supportive regulations, with revenue forecasts indicating substantial growth [30][34] Group 4: Financial Performance and Projections - Luxshare Precision reported a revenue of 177.18 billion RMB for the first three quarters of 2024, with a year-on-year growth of 13.67% [23] - Zhaoyi Innovation's revenue for Q1 2024 showed a year-on-year increase of 21.32%, reflecting a recovery in the consumer market [27] - Zhongmin Resources is enhancing its lithium salt self-sufficiency and expanding its copper mining projects, with projected revenues of 56.91 billion to 97.27 billion RMB from 2024 to 2026 [49][50]

Group 1 - The "Zhuque-3" rocket is set to make its maiden flight in mid to late November, potentially becoming China's first operational reusable launch vehicle [1] - Beijing plans to construct a large centralized data center system with over 1 GW power capacity in the 700-800 km twilight orbit to facilitate large-scale AI computing in space [1] - As of November 28, 2025, the CSI Defense Index (399973) has risen by 0.36%, with notable increases in constituent stocks such as KST (688568) up 4.50% and Triangle Defense (300775) up 2.98% [1] Group 2 - The CSI Defense Index closely tracks the performance of listed companies under the top ten military industrial groups, reflecting the overall performance of defense industry stocks [2] - As of October 31, 2025, the top ten weighted stocks in the CSI Defense Index include AVIC Shenyang Aircraft (600760) and Aero Engine Corporation of China (600893), collectively accounting for 44.41% of the index [2]

Group 1 - The aerospace sector is entering a new quality and growth cycle as the "14th Five-Year Plan" concludes, with the core driving force shifting from industrial prosperity logic to performance perspective [15][13]. - The aerospace ETF has seen continuous net inflows since September 1, with its scale reaching a new high, growing by 168% since its launch on May 29 [8][24]. - The upcoming 2025 Asia General Aviation Exhibition, taking place from November 27 to November 30, will focus on low-altitude economy and cover the entire general aviation industry chain, attracting nearly 400 enterprises from 22 countries [11][12]. Group 2 - The commercial aerospace sector is experiencing significant policy support, with the National Space Administration's action plan outlining 22 key measures to promote high-quality development and safety in commercial aerospace [12][18]. - The military trade and commercial aerospace sectors are expected to accelerate, opening up growth space as the "15th Five-Year Plan" begins [13][16]. - The Chinese commercial aerospace market is projected to reach a scale of 2.3 trillion yuan in 2024 and is expected to exceed 2.5-2.8 trillion yuan in 2025, with an annual compound growth rate exceeding 20% [21][24]. Group 3 - The aerospace sector is benefiting from a surge in military orders, with a clear path to performance recovery as the "15th Five-Year Plan" is finalized and orders are released [29][21]. - The demand for military trade is expected to resonate strongly with supply, potentially breaking the long-standing Western monopoly in the high-end military trade market [17][16]. - The low-altitude economy is emerging as a new economic form, leveraging technologies like drones and eVTOLs, with significant orders already being placed [28][27]. Group 4 - The aerospace ETF Tianhong (159241) tracks the aerospace industry index and has a high concentration of military-related stocks, benefiting from developments in national defense and aerospace technology [29][30]. - Key companies in the aerospace ETF include Guangqi Technology, AVIC Shenyang Aircraft, and Aero Engine Corporation of China, which are expected to see performance improvements due to full orders and accelerated deliveries [30][29].

Core Viewpoint - The aerospace sector has experienced a notable pullback since September, but long-term investment value remains significant despite short-term sensitivity to order cycles [2][5][14]. Group 1: Market Performance - Since September, key events such as military parades and military trade orders have led to a clear retreat in the aerospace sector [2][14]. - The aerospace ETF Tianhong (159241) has seen continuous net inflows since September 1, with its scale reaching a new high, growing by 168% since its launch on May 29 [9]. - The overall market showed mixed performance, with the Shanghai Composite Index up 0.29% and the ChiNext Index down 0.44% [6]. Group 2: Future Outlook - The aerospace sector is entering a new growth cycle driven by performance perspectives, with the "14th Five-Year Plan" nearing completion and the "15th Five-Year Plan" set to initiate new equipment construction [4][15]. - The upcoming 2025 Asia General Aviation Exhibition, starting November 27, will focus on low-altitude economy and cover the entire general aviation industry chain, with an upgraded scale and participation from nearly 400 enterprises [12]. - The commercial aerospace sector is supported by a new action plan from the National Space Administration, which outlines 22 key measures to promote high-quality development [13][21]. Group 3: Industry Dynamics - The global military trade demand is expected to grow, with China's military trade volume projected to reach $45 billion by 2025, a 30% increase year-on-year [16][17]. - The commercial aerospace market in China is anticipated to grow rapidly, with estimates suggesting a market size of 2.3 trillion yuan in 2024 and a potential increase to 2.5-2.8 trillion yuan in 2025, reflecting a compound annual growth rate of over 20% [21]. - The aerospace sector is expected to benefit from a surge in satellite manufacturing revenue, which saw an 85.28% year-on-year increase in the first three quarters of the year [23]. Group 4: Investment Opportunities - The aerospace sector's growth narrative is multi-dimensional, with short-term benefits from military orders and long-term potential from commercial aerospace and low-altitude economy developments [26]. - Leading companies in the sector, such as AVIC Chengfei, AVIC Shenyang, and Aero Engine Corporation of China, are expected to see improved performance due to a combination of full orders and accelerated deliveries [26]. - The Tianhong Aerospace ETF tracks the aerospace industry index and includes major companies, making it a potentially less risky investment option for investors [26][27].

Group 1 - The major indices mostly rose in early trading on November 26, with the commercial aerospace concept experiencing a peak and subsequent pullback [1] - The Aerospace ETF Tianhong (159241) recorded a trading volume exceeding 49 million yuan, with Guangqi Technology leading the gains among its constituent stocks [1] - As of November 25, the Aerospace ETF Tianhong (159241) has attracted over 140 million yuan in capital since the beginning of November [1] - The ETF tracks the Guozheng Aerospace Index, which covers the aerospace industry chain, with a combined weight of over 68% in aerospace and aviation equipment [1] - The top ten holdings include leading state-owned enterprises such as Aero Engine Corporation of China, AVIC Shenyang Aircraft Corporation, and AVIC Chengfei, providing both stability from core assets and growth potential from smaller market cap companies [1] Group 2 - The 2025 Asia General Aviation Exhibition is set to open on November 27 in Zhuhai, featuring 381 companies from 22 countries and regions [1] - On November 23, various performance teams conducted their first adaptive flight training after transitioning to Zhuhai, with the "Red Star" flight demonstration team showcasing maneuvers such as ultra-low altitude vertical climbs and half-roll landings for the first time to the public [1] - Zhuhai has established a "dual exhibition" pattern with the biennial "China Airshow" and the annual "Asia General Aviation Exhibition," aiming to deepen low-altitude economic applications and stimulate greater potential for the "Sky City" [2] Group 3 - Guotai Junan Securities believes that the Chinese aviation industry is entering a "super cycle" and suggests seizing the opportunity during this counter-cyclical period, emphasizing the long-term logic of the Chinese aviation industry [3]

Investment Rating - The report maintains an "Overweight" rating for the defense and military industry [6]. Core Insights - The geopolitical uncertainty, particularly regarding Japan's shift from "strategic ambiguity" to potential military intervention in the Taiwan Strait, has heightened the focus on the military industry [19][20]. - The defense sector is expected to see increased attention and potential investment opportunities due to the evolving geopolitical landscape [11][20]. Market Overview - The defense and military index of Shenwan fell by 1.72% this week, while the Shanghai Composite Index dropped by 3.90% [29]. - The defense and military sector's PE (TTM) stands at 67.3 times, with sub-sectors like aviation equipment at 71.5 times and aerospace equipment at 271.2 times [36]. Key Sector Dynamics Controlled Nuclear Fusion - Shanghai Electric has disclosed its involvement in multiple major fusion projects, including the domestic first plasma burning experiment device BEST and the international ITER project [21]. Low-altitude Economy - The 27th High-Tech Fair's low-altitude economy exhibition in Shenzhen showcased over 200 companies, covering the entire supply chain from eVTOL to drone components [22]. Aviation Engines & Turbines - China Aviation Power showcased 19 types of power products at the Dubai Airshow, marking the first appearance of the C919 in the Middle East [23]. Satellite Internet - The World Internet Conference highlighted the application of satellite internet in enhancing county-level economic development [26]. Suggested Focus Areas - **Missile and Military Electronics**: Companies like Zhenhua Technology, Hongyuan Electronics, and Huada Electronics are recommended for investment [16]. - **Aviation Engines**: Focus on companies like AVIC Engine and AVIC Control [16]. - **Military Trade**: Companies such as AVIC Chengfei, AVIC Shenyang, and AVIC Xi'an are highlighted [16]. - **New Domains and Quality Construction**: Emphasis on commercial aerospace and low-altitude economy companies [16].

Core Viewpoint - The recent procurement agreement for 18 AS700 manned airships signifies a breakthrough in the industrialization of domestic airship technology, reflecting strong market recognition of Chinese-made airships [1][3]. Group 1: Procurement Agreement - The Aviation Industry Special Flight Research Institute has signed a procurement agreement for 18 manned airships with Zhejiang Airspace Integration Low-altitude Industry Development Co., Ltd, highlighting the market's confidence in domestic airship products [1]. - The agreement follows a series of discussions and assessments regarding the commercial operation and sustainable profit models for the AS700 airship, culminating in a comprehensive consensus with local government [3]. Group 2: Delivery and Production - The first AS700 airship was successfully delivered to Shaoxing Jian Shui Technology City in November, marking the completion of the initial delivery phase and the transition to mass production orders [5]. - The entire process from research and development to delivery and operation of the domestic manned airship has been fully integrated, paving the way for future production and operational enhancements [5]. Group 3: Future Development and Applications - The Aviation Industry Special Flight Research Institute aims to leverage this opportunity to accelerate product optimization and expand its industrial layout, targeting diverse application scenarios such as aerial tourism, urban security, aerial surveying, emergency rescue, and customized educational programs [5]. - The goal is to promote technical standards and operational models across more regions, fostering a win-win ecosystem and contributing to the formation of a national low-altitude economic industrial cluster, thereby linking the upgrade of manufacturing with high-quality local economic development [5].