Orient Securities·2025-03-09 02:51Investment Rating - The report maintains a "Positive" investment rating for the defense and military industry in China [5]. Core Insights - The global military trade market is expected to grow significantly due to ongoing geopolitical conflicts, with China's military products becoming increasingly competitive in terms of cost-effectiveness [3][7]. - China's military trade exports have shown a remarkable increase, with the export volume rising from 314 million TIV in 2000 to 2.432 billion TIV in 2023, representing a nearly sevenfold increase [42][45]. - The report highlights the potential for various military products, including drones, tanks, and missiles, to capture a larger share of the international market [3][7]. Summary by Sections Global Military Trade Demand - Global military trade demand remains high despite a slight decline in 2023, with a peak of 33.544 billion TIV in 2022, reflecting a 27.3% year-on-year growth [16][38]. - The demand side is relatively fragmented, with the top ten importers, including India and Saudi Arabia, accounting for 48% of total imports [18][19]. Geopolitical Conflicts and Military Spending - Geopolitical tensions have led to increased military spending globally, with 2023 military expenditures reaching $2.39 trillion, marking a 6.8% increase from the previous year [36][38]. - The report notes that military trade is positively correlated with military spending, indicating that rising defense budgets will likely boost military trade volumes [38][39]. China's Military Trade Landscape - China's military exports are concentrated in a few key markets, with Pakistan being the largest importer, accounting for 58% of exports from 2018 to 2023 [45][47]. - The types of military equipment exported by China include aircraft, ships, armored vehicles, and missiles, which together account for 86% of total exports [48][49]. Investment Recommendations - The report suggests focusing on specific companies within the military sector, such as Guorui Technology for radar systems, Inner Mongolia First Machinery Group for tanks, and Zhongyun Drone for unmanned aerial vehicles [7][8].