困境反转，把握行业翻转趋势

Investment Rating - The report assigns a rating of "Outperform" for the military industry, indicating an expectation that the industry will perform better than the market over the next six months [1]. Core Insights - The military industry is expected to be one of the sectors with the greatest marginal improvement. Despite a relatively weak performance since 2023, the market has priced in most of the negative news, suggesting a potential turnaround [2]. - The themes of asset securitization, restructuring, and mergers and acquisitions are likely to become central to the industry. With increased focus on market capitalization management by state-owned enterprises and support from regulatory bodies, these themes are expected to gain higher premiums and market recognition as risk appetite improves [2]. - The military industry represents a new type of productive force, particularly exemplified by the low-altitude economy, which integrates various economic activities involving manned and unmanned aerial vehicles [2]. - Military trade is emerging as a new trend in industry development, with China's military industry now possessing a strong technical foundation and competitive pricing in the international market, which will help reduce domestic costs and accelerate technological iterations [4]. - The rising risk appetite in the market has significantly enhanced the effectiveness of geopolitical events in stimulating military industry performance, with expectations of sustained military spending growth despite economic pressures [4]. - The military industry is still in a major cyclical upturn, with the upcoming "14th Five-Year Plan" and the clarity of the "15th Five-Year Plan" indicating a potential "V" shaped recovery. Key areas to watch include unmanned equipment, satellite internet, and electronic countermeasures [4]. Summary by Sections - Market Performance: The military industry has shown signs of recovery after a period of underperformance, with market expectations aligning with mid-year reports [2]. - Strategic Themes: Focus on asset management, restructuring, and mergers is expected to drive industry growth, supported by regulatory encouragement [2]. - Technological Development: The low-altitude economy is highlighted as a significant area of growth, integrating various applications from tourism to emergency services [2]. - Military Trade Dynamics: The military trade sector is anticipated to expand, leveraging China's competitive advantages to enhance domestic military capabilities [4]. - Geopolitical Influences: Increased geopolitical tensions are expected to bolster military spending and industry performance, reflecting a global arms race [4]. - Cyclical Trends: The military industry is positioned for a significant recovery phase, with new technologies and military-civilian integration being key focus areas [4].