Changjiang Securities·2025-05-12 01:07Investment Rating - The report maintains a "Positive" investment rating for the defense and military industry [2] Core Insights - The ongoing India-Pakistan conflict has reinforced the recognition of domestic equipment performance advantages, driving long-term high prosperity for domestic manufacturers in the military trade market [6][8] - The demand for advanced fighter jets is being driven by air combat needs, with the J-35 model leading the way in production expansion [50][59] - The development of a systematic combat approach is crucial for enhancing operational efficiency and decision-making speed in military engagements [103][111] Summary by Sections Section 1: India-Pakistan Conflict - The recent India-Pakistan conflict has escalated due to terrorist attacks and military friction, leading to significant military actions and heightened tensions [11][14] - Pakistan has demonstrated strong air superiority, utilizing Chinese-made J-10C fighter jets to achieve notable victories against Indian aircraft [19][22] Section 2: Military Trade Dynamics - Pakistan has been a core customer for Chinese military exports, with 62.17% of China's military trade weapons exported to Pakistan from 2015 to 2024 [23] - The global military trade market is significantly larger than the domestic market, with a financial value of at least $138 billion in 2022 [40][41] Section 3: Systematic Combat and Data Links - The systematic approach to combat has proven advantageous for Pakistan, allowing for better coordination and effectiveness compared to India's diverse procurement strategy [27][31] - Data links are essential for real-time information sharing and operational efficiency, significantly enhancing combat effectiveness [106][111] Section 4: Company Insights - AVIC Shenyang Aircraft Corporation - AVIC Shenyang is investing 11 billion yuan in production expansion and modernization to meet the demand for new aircraft models [76] - The company is focusing on supply chain management and lean production to ensure timely delivery and high-quality output [81][85] - Despite a decline in revenue due to external factors, the company maintains a high gross margin and is preparing for future demand increases [97][99]