军工行业双周报：两会前瞻：军费温和增长，战略新兴产业成焦点

Investment Rating - The report maintains a "Recommended" rating for the defense and military industry [1] Core Insights - The report highlights a moderate growth in military expenditure, with a projected defense budget of approximately 1.67 trillion RMB for 2024, reflecting a year-on-year increase of 7.2% [11][19] - Strategic emerging industries such as "low-altitude economy," "aerospace information," and "artificial intelligence" are expected to be focal points during the national congress [20] - The report suggests that the military industry is likely to experience positive returns before and after the national congress, with historical data indicating a 67% probability of positive returns in the weeks surrounding the event [4][7] Summary by Sections 1. National Congress Outlook: Moderate Growth in Military Expenditure, Focus on Strategic Emerging Industries - Historical data shows a high probability of positive returns for the military index before and after the national congress, with an average return of 1.38% in the week prior [4][7] - The defense budget is expected to grow steadily, with a projected increase of 6.0%-7.0% for 2025, totaling approximately 1.77-1.79 trillion RMB [19] 2. Military Industry Performance - The military industry index has shown a 2.98% increase recently, ranking 7th among 29 primary sectors [25] - As of February 23, 2025, there are 166 listed companies in the military sector, accounting for 2.67% of the total A-share market capitalization [33] 3. Industry Dynamics - The report notes that the U.S. is planning to reduce its defense budget by 8% annually over the next five years, which may influence China's military modernization efforts [16][18] - The focus on emerging industries such as artificial intelligence and low-altitude economy is evident in government reports from 30 out of 31 provincial administrations [20] 4. Investment Recommendations - The report advises a proactive approach leading up to the national congress, with expectations for sectors related to low-altitude economy and commercial aerospace to yield excess returns [4][20] - The military sector's current valuation is approximately 59.7%, indicating significant potential for upward adjustment [37][40]