Shenwan Hongyuan Securities·2025-04-03 11:43Investment Rating - The report maintains a positive outlook on the defense and military industry, indicating an "Overweight" rating for the sector [2][5]. Core Insights - The "14th Five-Year Plan" is nearing completion, with orders gradually being fulfilled, leading to a positive performance forecast for Q1 2025. The report highlights 41 key companies across the military supply chain, with a total market capitalization of 1,111.76 billion, accounting for approximately 46.4% of the total market cap of the Shenwan Defense and Military Index. The expected total profit for these companies in 2025 is approximately 32.09 billion (yoy +38.3%), with Q1 2025 profits estimated at around 7.112 billion (yoy +19.2%) [5][6][8]. Summary by Sections Upstream - Expected performance growth for upstream electronic components and high-end raw materials in Q1 2025 is projected at 24.2% and 20.8% year-on-year, respectively. This growth is attributed to the resolution of previous disruptions and accelerated domestic substitution [5][6]. Midstream - Midstream subsystems and structural components are expected to see year-on-year growth of 25.2% and 8.4% in Q1 2025, respectively. This growth is driven by recovering downstream demand and the realization of scale effects in the structural components sector [5][6]. Downstream - Downstream main engine manufacturers are projected to achieve a year-on-year growth of 12.6% in Q1 2025. Notable individual performance includes a rapid increase for AVIC Helicopter, expected to grow by 56.5%, while other companies like Inner Mongolia First Machinery Group and AVIC Xi'an Aircraft are expected to grow by 23.7% and 11.8%, respectively [5][6]. Order Improvement and Thematic Catalysts - The report identifies two main drivers for the expected improvement in military orders: the transition from "point orders" to "line orders" in specific fields, and the emergence of "surface orders" across all sectors. Additionally, themes such as low-orbit satellites, low-altitude economy, military AI, and military robotics are expected to create new investment opportunities [5][6]. Recommended Stocks - The report recommends several stocks categorized into high-end combat capabilities and new combat capabilities, including companies like Feilihua, Tianqin Equipment, and Chengdu Huami for high-end combat, and Chengdu Huami, Huaqin Technology, and Aerospace Electronics for new combat capabilities [5][6].