军工行业本周观点：依旧坚定看好

Investment Rating - The report maintains a positive outlook on the defense and military industry, indicating that the sector is at an inflection point with potential beta opportunities ahead [3][11][20]. Core Insights - The defense and military sector is expected to benefit from the realization of demand transmission, with the industry fundamentals approaching a turning point. The investment focus should be on traditional ground combat equipment and engine sectors, as well as high-elasticity directions that can cross the "14th Five-Year Plan" cycle [3][20][22]. - The report highlights that the military industry index has shown a relative underperformance compared to the broader market, but it is anticipated that the fundamentals will drive future performance as demand recovers in 2024 and 2025 [11][12][22]. Summary by Sections Weekly Market Review - The military industry index decreased by 0.83% during the week, while the CSI 300 index fell by 0.14%, resulting in a relative underperformance of -0.69 percentage points. The military index has increased by 19.63% since May 2024, outperforming the CSI 300 index by 10.66 percentage points [11][24][42]. - The report notes that the engine sector performed slightly better, primarily due to significant gains from specific component stocks [31][41]. Stock Performance - The top-performing stocks included Western Materials (16.91%), Phoenix Optical (13.49%), and Fuguang Shares (9.65%), benefiting from external factors and trends in the electronic communication sector [41][48]. - Conversely, the worst-performing stocks were led by Hezhong Shizhuang (-14.73%) and Sikui (-14.52%), which experienced profit-taking after significant gains in previous weeks [41][61]. Funding and Valuation - As of December 20, the military industry index's TTM price-to-earnings ratio stands at 60.6, indicating a high valuation level. However, the report suggests that the current valuation is justified given the expected recovery in industry fundamentals in 2024 and 2025 [12][14][16]. - The report indicates a slight decrease in financing buy-in amounts and balances, reflecting a temporary decline in leveraged interest in the military sector. However, there is an expectation for a rebound in financing activity as demand strengthens [32][67].