军工行业周报：缩量，蓄势

Investment Rating - The report maintains an "Accumulate" rating for the defense and military industry [1]. Core Viewpoints - The defense and military industry index decreased by 1.72%, while the Shanghai Composite Index fell by 2.23% and the Shenzhen Component Index by 1.81%. The market sentiment remains low, but certain stocks within the China Shipbuilding sector saw significant gains, indicating potential resilience [1][4]. - The industry is experiencing its worst mid-year performance in a decade, with median revenue growth for core military enterprises turning negative for the first time, and net profit growth dropping to -17.99% [1][7]. - Despite the negative performance, there is a notable increase in ETF inflows into the military sector, suggesting a high allocation value at current valuation levels and a reliable growth expectation in domestic demand [1][4]. - The report highlights that the military industry is likely to see a wave of mergers and acquisitions, driven by policy support and the need for industry consolidation [5][15]. Summary by Sections Recent Market Performance - The defense and military index saw a decline of 1.72%, with notable stock performances from companies like Kunshan Intelligent (+15.97%) and China Marine (+8.82%) [12]. - The trading volume for the military sector dropped to 54.637 billion yuan, the lowest since May 2022 [1]. Mergers and Acquisitions - The report discusses the anticipated merger between China Shipbuilding and China Shipbuilding Heavy Industry, which is seen as a strategic move to enhance competitiveness and reduce industry rivalry [4][5]. - The report emphasizes that the military industry is entering a new phase of mergers and acquisitions, supported by recent policy measures aimed at promoting industry consolidation [5][15]. Financial Performance Analysis - The median revenue growth for military enterprises fell to -3.08%, and net profit growth dropped to -22.56% in the latest mid-year reports [6][7]. - The report notes a significant increase in inventory and accounts receivable, indicating growing financial pressure within the industry [7]. Investment Opportunities - The report suggests focusing on investment opportunities in unmanned equipment, satellite internet, and electronic countermeasures, as well as in the civil-military integration sectors [8]. - Specific companies and sectors are highlighted for potential investment, including those involved in aircraft, aerospace equipment, and military materials [9][8].