Minsheng Securities·2025-05-08 10:23Investment Rating - The report maintains a positive outlook for the military industry, suggesting that the "performance bottom" has been established and that the sector is expected to enter a new growth cycle from 2025 to 2027 [6]. Core Insights - The military industry experienced a decline in total revenue and net profit in 2024, with total revenue down 5% and net profit down 48% year-on-year. In Q1 2025, total revenue continued to decline by 5% year-on-year, while net profit decreased by 34% year-on-year [1][11]. - The report indicates that the decline in revenue and profit is "non-linear," with a significant drop in net profit compared to revenue due to factors such as price decreases and increased impairment losses [2][19]. - The shipbuilding sector showed the best performance, with net profit increasing by 88% in 2024, while other sectors like aerospace and weapons faced significant losses [4][47]. Summary by Sections Performance Review - In 2024, the military industry (excluding shipbuilding) achieved total revenue of 458 billion yuan, down 5.3% year-on-year, and a net profit of 187 billion yuan, down 48.4% year-on-year. Including shipbuilding, total revenue was 683.1 billion yuan, down 1.3%, and net profit was 263 billion yuan, down 34.7% [11][12]. - The report highlights that the industry faced a continuous decline in net profit over seven consecutive quarters from Q3 2023 to Q1 2025, with Q4 2024 marking the first quarterly loss in history [2][60]. Trend Analysis - The report notes that the industry's gross profit margin decreased by 2.1 percentage points to 21.6% in 2024, and the net profit margin decreased by 3.4 percentage points to 4.4% [19][59]. - Inventory levels increased to 225.8 billion yuan by the end of 2024, accounting for 49% of total revenue, indicating inventory buildup and preparation for order recovery [23][25]. Sector Performance - The shipbuilding sector achieved a total revenue of 225.1 billion yuan in 2024, with a year-on-year growth of 8%, and net profit of 76 billion yuan, up 87.7% [36][47]. - The aerospace and weapons sectors experienced significant declines, with net profits dropping sharply due to demand-side impacts [4][42]. Recommendations - The report suggests focusing on specific segments such as guided weapons, new combat capabilities, military trade, and commercial aviation, indicating potential investment opportunities in companies like Feiliwa, Huayin Technology, and others [5].