Core Points - The Shanghai Composite Index rose by 0.34%, while the Shanghai Military Industry Index increased by 0.37%, closing at 8877.18 points with a trading volume of 45.532 billion yuan [1] - The Shanghai Military Industry Index has seen a 10.23% increase over the past month, a 19.66% increase over the past three months, and a year-to-date increase of 22.58% [1] - The index includes listed companies primarily engaged in the military industry, selected from the ten major military groups and other related firms, reflecting the overall performance of military industry stocks in the Shanghai market [1] Index Composition - The top ten weighted companies in the Shanghai Military Industry Index are: China Shipbuilding (9.78%), AVIC Shenyang Aircraft (7.89%), China Heavy Industry (6.59%), Aero Engine Corporation (6.39%), Aerospace Electronics (3.56%), AVIC Avionics (3.52%), China Power (3.07%), Ruichuang Micro-Nano (2.9%), Western Superconducting (2.89%), and AVIC High-Tech (2.53%) [1] - The index is fully composed of companies listed on the Shanghai Stock Exchange, with an industry composition of 77.78% in industrials, 11.88% in information technology, 5.55% in materials, 3.34% in communication services, and 1.44% in consumer discretionary [1] Index Adjustment - The index samples are adjusted biannually, with adjustments occurring on the next trading day after the second Friday of June and December, with a sample adjustment ratio not exceeding 10% [2] - Weight factors are adjusted in accordance with the sample changes, remaining fixed until the next scheduled adjustment unless special circumstances arise [2]

Core Viewpoint - The stock price of Aviation Power reported at 41.51 yuan, showing a slight increase of 0.13 yuan from the previous trading day, indicating a stable market performance [1] Company Overview - Aviation Power is a key player in China's aviation engine sector, primarily engaged in the research, development, manufacturing, and maintenance of aviation engines and related products [1] - The company's products are widely used in both military and civilian aviation fields, holding a significant position in the aviation power equipment sector [1] Stock Performance - On August 11, the stock experienced a rapid decline, with a drop of over 2% within five minutes, reflecting market volatility [1] - The highest intraday price reached 42.56 yuan, while the lowest was 41.20 yuan, resulting in an overall trading range of 3.29% for the day [1] - The trading volume for the day was 198,377 hands, with a total transaction amount of 826 million yuan [1] Capital Flow - On the same day, the net inflow of main funds into Aviation Power was 24.4 million yuan, accounting for 0.02% of the circulating market value [1] - Over the past five trading days, the cumulative net outflow of main funds was 39.6 million yuan, representing 0.04% of the circulating market value [1]

Summary of Key Points from Conference Call Industry Overview - The military industry is currently experiencing a favorable comparative advantage within the overall market, with some core assets still undervalued despite high returns from certain key stocks [2][17]. Company Insights 中航光电 (AVIC Optoelectronics) - Achieved a compound annual growth rate (CAGR) of 25% in revenue and 26% in profit over the past 20 years, driven by both military and civilian product lines [1][3]. - The company has implemented cost reduction and efficiency improvement measures, including expanding financial personnel and establishing cost centers [5]. - Expected performance for 2025-2027 is projected at 3.7 billion RMB, 4.2 billion RMB, and 4.9 billion RMB respectively, with current valuations at 22x, 19x, and 17x, indicating it is currently undervalued [1][6]. - Focused on the electric vehicle sector by partnering with key automotive manufacturers to achieve growth above industry averages [4]. 航发动力 (Aero Engine Corporation of China) - The only listed platform for military aircraft engines in China, with a relatively low market valuation compared to foreign counterparts [1][9]. - Anticipates significant growth in the aftermarket as aircraft deliveries increase during the 14th Five-Year Plan, with a projected domestic revenue of approximately 45 billion RMB by 2024 [9]. - The potential aftermarket space is estimated to exceed 400 billion RMB over the next 20 years, indicating high growth certainty [9]. 中航西飞 (AVIC Xi'an Aircraft Industry Group) - Recently underwent a leadership change, with a younger management team expected to drive new development directions [11][12]. - Responsible for key components of the C919 aircraft, with a potential revenue increase of 12 billion RMB if 150 units are delivered annually [14]. - Engaged in international military trade, with high expectations for the export of the Y-20 transport aircraft [15][16]. Market Trends and Predictions - The optoelectronics sector is expected to enter a new phase of prosperity by Q4 2025, benefiting from improved fundamentals [7][8]. - The military industry is poised for a revaluation of assets as the 14th Five-Year Plan concludes and the centenary of the military approaches, with a focus on AI deployment and modernization [17]. Additional Considerations - The leadership changes at 中航西飞 indicate a strategic shift towards enhancing investor relations and increasing external communication [12]. - The challenges faced by the C919 project, including delays due to export restrictions on key technologies, have been largely resolved, with expectations for improved delivery rates in the second half of the year [13].

Group 1 - The core index, the China Securities National New Central Enterprise Technology Leading Index, has shown a 5.67% increase over the past month, an 8.63% increase over the past three months, and a 6.56% increase year-to-date [1] - The index is designed by Guoxin Investment Co., Ltd., selecting 50 listed companies from industries such as aerospace, defense, computer, electronics, semiconductors, and communication equipment to reflect the overall performance of central enterprise technology theme stocks [1] - The top ten weighted stocks in the index include Hikvision (9.16%), AVIC Shenyang Aircraft (6.8%), Changdian Technology (6.29%), AVIC Optoelectronics (6.08%), Shenzhen South Circuit (5.52%), Aero Engine Corporation of China (5.04%), AVIC Chengfei (3.63%), Guangxun Technology (3.42%), Shanghai Beiling (3.3%), and Lanke Technology (2.93%) [1] Group 2 - The index's holdings are primarily composed of 49.07% in information technology, 39.18% in industrials, and 11.76% in communication services [2] - The index samples are adjusted biannually, with adjustments occurring on the next trading day after the second Friday of June and December each year [2] - Public funds tracking the index include various funds from E Fund, Yinhua, and Southern Asset Management, specifically designed to follow the China Securities National New Central Enterprise Technology Leading Index [2]

Investment Rating - The report maintains an "Accumulate" rating for the defense and military industry [5] Core Views - The report is optimistic about the gradual improvement of fundamentals and the upward trend in new domains and new quality combat capabilities, particularly in satellite internet construction [8][24] - The defense index has risen by 24.04% since May 6, driven by military trade and parade sentiments, indicating strong market performance [8][23] Summary by Sections Industry Overview - The defense and military industry comprises 143 listed companies with a total market value of 30,365.12 billion and a circulating market value of 25,995.20 billion [2] Market Performance - The defense and military index increased by 5.93% this week, outperforming other major indices [7][37] - The current PE(TTM) for the defense and military sector is 75.6 times, with sub-sectors showing varying valuations [7][43] Key Improvement Tracks - **Missile and Military Electronics**: Anticipated growth in demand for precision-guided munitions is expected to lead to a surge in military electronics orders starting from Q4 2024 [8][23] - **Aerospace Engine Supply Chain**: Recovery in military engine procurement and improvements in profitability are expected due to new model introductions and maintenance business growth [9][10][23] Focus Areas for Development - **New Generation Manned and Unmanned Aircraft**: The J-35 is expected to drive a new wave of growth in the aerospace supply chain [11][23] - **Satellite Internet**: The successful launch of the seventh batch of satellites for the GW constellation marks significant progress in satellite internet capabilities [12][24] - **Commercial Space Industry**: The report highlights the acceleration of commercial space activities, with plans for significant satellite launches in 2025 [14][24] Suggested Companies to Watch - **Missile and Military Electronics**: Companies like Zhenhua Technology, Hongyuan Electronics, and Torch Electronics are highlighted [19][25] - **Aerospace Engines**: Focus on Aviation Power and its supporting companies [26] - **New Generation Unmanned Aircraft**: Companies such as AVIC Shenyang Aircraft and AVIC Chengfei are recommended [27] Key Developments - **Nuclear Fusion**: The "Spark One" project aims to complete construction by the end of 2029, with a goal to demonstrate power generation by 2030 [15][28] - **Low-altitude Economy**: The successful flight of a 2-ton eVTOL for offshore oil platform logistics marks a significant milestone [16][29]

Core Insights - The heavy-duty gas turbine is a key power equipment in modern industry, converting thermal energy into mechanical energy, with a single unit power typically exceeding 50MW, and is widely used in power generation, industrial drives, and marine propulsion [1][4] - China has made significant breakthroughs in the heavy-duty gas turbine sector since launching the R0110 project in 2002, achieving complete self-research capabilities by 2024, with the market expected to reach 100 billion yuan by 2025 [1][16] - The industry is transitioning from being an "energy heart" to a "green engine," contributing to global energy transformation with advancements in hydrogen integration technology and digital twin management [1][22] Industry Overview - Heavy-duty gas turbines are classified based on cycle type (simple, combined, recuperative), application (power generation, mechanical drive, marine propulsion), and structure (multi-shaft, intercooled) [2][3] - The market for heavy-duty gas turbines in China reached 80 billion yuan in 2024, accounting for 10% of the overall market, with a projected growth to over 100 billion yuan in 2025 [16][18] Development History - The heavy-duty gas turbine sector in China has evolved from reliance on foreign technology to achieving significant self-sufficiency, with key milestones including the successful ignition of a 300MW F-class turbine in 2024 [4][16] - The establishment of the China Aviation Engine Group has accelerated technological advancements, enabling China to become one of the top five countries in heavy-duty gas turbine development [4][16] Industry Chain - The industry chain includes upstream material production (high-temperature alloys, titanium alloys), midstream turbine manufacturing led by state-owned enterprises, and downstream applications in power generation and industrial drives [6][8] - Domestic companies have achieved scale in mid-low end production, but high-end materials and precision processing still rely on imports, indicating a need for increased self-sufficiency [6][8] Current Market Status - The heavy-duty gas turbine market in China is characterized by a competitive landscape dominated by foreign giants (GE, Siemens, Mitsubishi) holding over 80% market share, while domestic companies are gradually increasing their market presence [18][19] - The F-class turbines have seen a domestic production rate exceeding 85%, while the H/J-class turbines still rely heavily on imports [18][19] Future Trends - The industry is moving towards low-carbon, intelligent, and diversified development paths, with hydrogen integration and digital twin technologies expected to enhance efficiency and reduce emissions [21][22] - The demand for gas turbines in new applications such as data centers and marine equipment is expected to grow significantly, driven by the need for high-efficiency, compact power solutions [22][24]

Investment Rating - The report maintains a "Positive" investment rating for the defense and military industry [4] Core Viewpoints - The report emphasizes the importance of re-evaluating the value of core assets at low levels, particularly in the context of the 14th Five-Year Plan, which is expected to drive significant growth in the military industry [6][100] - The report highlights the potential for companies like AVIC Optoelectronics, AVIC Engine, and AVIC Xi'an Aircraft to benefit from increasing demand and strategic expansions in their respective sectors [6][35][63] Summary by Sections AVIC Optoelectronics - The company has achieved a compound annual growth rate (CAGR) of 25% in revenue and 26% in profit over the past 20 years, with a revenue of 20.686 billion yuan in 2024, reflecting a year-on-year growth of 3.04% [10][11] - AVIC Optoelectronics is expanding its product offerings from connectors to comprehensive interconnection solutions, enhancing its value proposition in the defense sector [17] - The company is also diversifying into civilian sectors, focusing on smart connected vehicles and communication systems, which are expected to drive future growth [18] AVIC Engine - The report notes that aviation engines are high-value consumables, with a significant long-term demand for maintenance and replacement driven by the existing fleet of military aircraft [40][50] - The potential market for military aviation engine aftermarket services is estimated to exceed 428.74 billion yuan over the next 20 years, with an average annual value of 21.44 billion yuan [50] - The report highlights the increasing share of maintenance services in the revenue of leading international engine manufacturers, indicating a similar trend may emerge in domestic companies [43][47] AVIC Xi'an Aircraft - The company is positioned to benefit from the increasing demand for large transport aircraft, with a focus on the Y-20 model, which is currently in high demand globally [97] - The new management team at AVIC Xi'an Aircraft is expected to enhance investor relations and improve communication with stakeholders, potentially leading to better market performance [72] - The lifting of the U.S. ban on the export of commercial aircraft engines to China is anticipated to accelerate the delivery schedule of domestically produced large aircraft [79] Overall Industry Outlook - The report suggests that the military industry is entering a phase of significant growth, driven by policy support, increased military spending, and technological advancements [100] - Companies are encouraged to focus on enhancing product capabilities, increasing market penetration, and improving average transaction values to capitalize on the expected growth [100]

Group 1 - The core viewpoint of the news is that China Aviation Engine Corporation has applied for a patent related to a method for constructing quality assessment data files for blades, indicating a focus on enhancing the accuracy and efficiency of blade quality assessment [1] - The patent application was filed on April 2025, and the public announcement number is CN120449464A, showcasing the company's ongoing innovation efforts [1] - The proposed method integrates four types of heterogeneous data—theoretical benchmarks, tolerance parameters, endpoint constraints, and measured data—into a standardized framework, enabling comprehensive digital integration from design to testing [1] Group 2 - China Aviation Engine Corporation, established in 1993 and located in Xi'an, primarily engages in loading, handling, and warehousing industries, with a registered capital of approximately 2.67 billion RMB [2] - The company has made investments in 16 enterprises and participated in 5,000 bidding projects, reflecting its active role in the industry [2] - The company holds a total of 1,979 patents and possesses 124 administrative licenses, indicating a strong emphasis on innovation and regulatory compliance [2]

Core Viewpoint - The high-end equipment sector is experiencing mixed performance, with significant movements in specific stocks and a positive long-term outlook for the military industry driven by technological advancements and increased defense spending [1][3][4]. Group 1: Market Performance - As of August 7, 2025, the CSI High-End Equipment Sub-Index decreased by 0.80%, with stocks showing varied performance; 712 led with an increase of 8.65%, while Guorui Technology saw the largest decline [1]. - The high-end equipment ETF (159638) had a turnover rate of 4.57% and a transaction volume of 54.32 million yuan, with an average daily transaction volume of 63.18 million yuan over the past week [3]. Group 2: ETF Performance - The latest scale of the high-end equipment ETF reached 1.198 billion yuan, with a net value increase of 33.28% over the past year [3]. - Since its inception, the ETF has recorded a highest single-month return of 19.30%, with the longest consecutive monthly gains being three months and a maximum increase of 21.15% [3]. Group 3: Industry Outlook - Recent reports indicate that the domestic military construction is transitioning towards "intelligent and unmanned" systems, with global military trade demand expanding, suggesting a long-term growth cycle for the military industry [3]. - The recent successful launch of the Pakistan Remote Sensing Satellite 01 demonstrates the maturity and stability of China's aerospace technology, while the successful flight of the Kuaizhou-1A rocket reinforces the high prosperity of the aerospace equipment sector [3]. Group 4: Key Stocks - As of July 31, 2025, the top ten weighted stocks in the CSI High-End Equipment Sub-Index accounted for 46.03% of the index, with notable companies including AVIC Shenyang Aircraft Company and Aero Engine Corporation of China [4]. - The performance of key stocks varied, with AVIC Shenyang Aircraft Company down by 2.36% and Aerospace Electronic Technology up by 2.08% [6]. Group 5: Investment Opportunities - Investors can consider the CSI High-End Equipment Sub-Index ETF linked fund (018028) for potential industry rotation opportunities [6].

Core Viewpoint - The military industry sector is experiencing a strong performance driven by multiple favorable factors, contributing to the recent upward trend in the stock market indices, particularly the Shanghai Composite Index, which closed at 3633.99 points, up 0.45% [1]. Group 1: Military Industry Performance - The military sector has shown significant strength, with various sub-sectors such as PEEK materials, liquid cooling servers, military equipment, and humanoid robots all performing well [3][5]. - The defense ETF (512670) has seen a year-to-date increase of 23.02%, leading its category, and has achieved three consecutive monthly gains [7][11]. - The overall market for defense and military indices has seen substantial growth, with the China Securities Defense Index rising by 22.95% since the beginning of the year, outperforming other similar indices [11][12]. Group 2: Investment Trends and Market Dynamics - There is a notable increase in capital expenditure (Capex) from overseas manufacturers, reinforcing the "investment-growth-reinvestment" cycle in the AI industry, which is closely linked to the military sector [6]. - The military industry is benefiting from geopolitical tensions, with global military spending projected to reach $2.7 trillion in 2024, a 9.4% increase year-on-year, which is expected to enhance China's share in the international arms trade [14]. - The military sector is entering a new order cycle, with a high degree of certainty for future demand, particularly in areas such as aviation, armaments, and drones, indicating a positive outlook for the second half of the year [17][15]. Group 3: Stock Performance and Fund Inflows - As of July 27, 42 military stocks reported a net profit of nearly 5.6 billion yuan, a year-on-year increase of over 45%, marking the highest level in five years [18]. - Institutional investors have begun to increase their allocation to military stocks after ten consecutive quarters of reduction, with military-themed funds growing significantly in the second quarter [18]. - The defense ETF (512670) has attracted a net inflow of 394 million yuan from June 23 to August 5, with a substantial increase in trading volume and fund size [27].