军工行业双周报：中央经济工作会解读：“AI+军事”，引领军工深刻变革

Industry Investment Rating - The report maintains a "Recommended" rating for the defense and military industry [5] Core Views - The integration of AI + military is leading a profound transformation in the defense industry, with AI technologies being applied across various military fields such as intelligence analysis, command decision-making, and autonomous systems [2][29] - The global AI in military market is expected to grow from $9.2 billion in 2023 to $38.8 billion by 2028, with a CAGR of 33.3% [31][35] - The defense sector's valuation is slightly below the historical median, with a TTM PE of 57.21x compared to the median of 59x, indicating potential upside [3][50] AI + Military Applications - AI is being applied in four key areas in the military: 1. Replacing repetitive tasks, such as missile trajectory calculations [2][29] 2. Real-time decision-making for situational awareness, such as target identification [2][29] 3. Operations in extreme environments, such as extreme cold or heat [2][29] 4. Integration into unmanned systems for tasks like enemy identification and attack [2][29] - Major military powers, including Russia and the US, are accelerating AI deployment in defense, with projects like the US "Venom" program and contracts with companies like Palantir Technologies [2][30] Market Performance and Valuation - The defense sector's valuation is currently at 57.21x TTM PE, below the historical median of 59x, with a valuation percentile of 52.8%, suggesting room for growth [3][50] - The sector has seen a 34% increase in the CSI Defense Index since mid-September, but the order inflection point has not yet appeared, indicating potential for continued volatility [4] - As of December 15, 2024, the defense sector's total market cap is 2.72 trillion yuan, accounting for 2.83% of the total A-share market cap [42] Investment Recommendations - Short-term: The sector may continue to fluctuate, with small and mid-cap stocks remaining active. Investors are advised to buy on dips as the weak 2024 earnings expectations are already priced in, and orders are expected to pick up [4][69] - Medium-term: The sector's valuation percentile is around 53%, with significant upside potential. The sector is expected to outperform the broader market in 2025, driven by a reversal in earnings and rising global defense spending [4][69] - Long-term: The sector is expected to maintain high growth momentum leading up to the 100th anniversary of the PLA in 2027, with capital operations such as M&A and asset injections remaining key investment themes [4][69] Key Companies to Watch - Short-term recovery + medium-term growth: Chujiang New Materials, Unigroup Guoxin, Xinjigang, AECC Aviation Power, Feilihua, Zhimingda, Aerospace CH UAV [4][69] - Short-term positive changes + long-term growth: Huaru Technology, China Satellite, AECC Aero-Engine, Sichuan Jiuzhou, Guorong Technology, Aerospace Electronics, Corelink, Jingpin Special Equipment [4][69] - Capital operation beneficiaries: AECC Aero Material, China Shipbuilding Industry, AECC Engine Control, Lucky Film [4][69] Sector Dynamics - As of December 13, 2024, the sector has repurchased 2.116 billion yuan of shares, accounting for 58%-96% of the planned repurchase amount, reflecting strong confidence in the industry's future [3][60] - Key developments include AVIC High-Tech establishing a new subsidiary, Guangyunda's private placement, and China Shipbuilding Industry's asset restructuring [56][58]