Changjiang Securities·2025-06-08 14:31Investment Rating - The report maintains a "Positive" investment rating for the defense and military industry [5]. Core Insights - The military trade is expected to lead to a revaluation of military industrial capacity and value [1]. - The report highlights the increasing demand for Chinese military equipment due to recent international conflicts, particularly the India-Pakistan conflict, which has showcased the performance of Chinese aircraft [25][29]. - The report emphasizes the transition of China's military trade into a new era characterized by high-quality self-developed equipment, moving away from reliance on imported Soviet-style equipment [46]. Summary by Sections Section 1: Military Trade Opportunities - Indonesia is considering the procurement of Chinese J-10 fighter jets, driven by performance in the India-Pakistan conflict and cost-effectiveness compared to Western counterparts [14]. - Pakistan is also looking to acquire various advanced Chinese military equipment, including J-35 fighter jets and HQ-19 air defense systems, following successful military engagements [19][25]. Section 2: Next-Generation Aircraft - The U.S. has announced the development of the F-47 next-generation fighter jet, which may create competitive pressure for Chinese manufacturers like AVIC [61]. - The report discusses the potential of the J-35 to become a military trade hit, comparable to the F-35, due to its lower cost and advanced capabilities [41]. Section 3: Military Equipment Production and Safety - The report highlights the urgent need for upgrades in the production safety of energetic materials, citing frequent accidents in the industry [96]. - The complexity and risks associated with the production of explosives and ammunition are noted as significant challenges, particularly in the context of increasing demand during conflicts [100][105]. Section 4: Industry Growth and Investment Opportunities - The military trade sector is expected to benefit from increased demand and pricing, with primary manufacturers likely to see significant profit improvements [52]. - The report suggests focusing on companies with popular or potentially popular military models, such as AVIC subsidiaries and missile manufacturers [55].