China Securities·2025-05-18 15:15Investment Rating - The report suggests a positive outlook for the military industry, indicating a potential recovery in performance by 2025, with a focus on companies with order recovery expectations and performance support [2][10][44]. Core Insights - The military sector reported a total revenue of 764.903 billion yuan in 2024, a year-on-year increase of 1.16%. Key segments showing positive growth include shipbuilding, aerospace engines, and aviation [2][10]. - The net profit for the military sector decreased to 26.655 billion yuan in 2024, down 38.01% year-on-year, primarily due to lower downstream demand and price reductions for certain products [12][10]. - The first quarter of 2025 is expected to show signs of recovery, particularly in ground equipment and aerospace segments, with a projected increase in associated transaction amounts [2][29]. Summary by Sections 1. Industry Overview - The military sector's revenue growth was driven by shipbuilding (10.87% increase), aerospace engines (4.46% increase), and aviation (2.75% increase), while ground equipment and commercial aerospace saw significant declines [10][12]. - The report highlights a structural recovery in the military sector, with positive signals emerging from major companies regarding contract announcements and performance stabilization [2][38]. 2. Investment Strategy - The report recommends focusing on three main investment lines: 1. Traditional military sectors with expected order recovery, particularly in aerospace engines, shipbuilding, and aviation [2][44]. 2. New domains characterized by low-cost, intelligent, and systematic features, including precision-guided munitions and unmanned systems [2][44]. 3. Companies with asset integration expectations and competitive positions in military trade markets [2][44]. 3. Recommended Stocks - Traditional military direction: Recommended stocks include Aerospace Power, Aerospace Control, and Huayin Technology [3][45]. - New domain and new quality direction: Recommended stocks include High De Infrared, North Navigation, and Aerospace Rainbow [3][45]. - Reform and overseas direction: Recommended stocks include Guorui Technology and Construction Industry [3][45].