Changjiang Securities·2025-06-16 01:16Investment Rating - The report maintains a "Positive" investment rating for the defense and military industry [2]. Core Insights - The ongoing conflicts in the Middle East, driven by long-standing geopolitical tensions, are expected to increase demand for military preparedness, thereby facilitating the export of advanced Chinese military equipment [8][17]. - The report highlights the significant role of the Middle East in global military trade, accounting for 26.03% of the world's military trade orders from 1985 to 2024, due to its complex religious and ethnic composition [17]. - The report identifies key companies such as AVIC Xi'an Aircraft Industry Group, which is positioned to benefit from the growing demand for large aircraft and military equipment, particularly in the context of the C919 project and military aircraft production [54][60]. Summary by Sections Section 1: Geopolitical Tensions and Military Demand - The report discusses the escalation of conflicts in the Middle East, particularly the recent Israel-Iran tensions, which are expected to drive military trade demand [11][20]. - It notes that the military trade orders in the Middle East are closely linked to local security situations, with historical conflicts leading to increased military procurement [24]. Section 2: Military Trade Dynamics - The report outlines that the U.S. has dominated military trade in the Middle East for nearly 40 years, with a market share of 50.92%, while China's share stands at 3.14%, indicating significant growth potential for Chinese military exports [28][30]. - It emphasizes that aircraft constitute the largest segment of military trade in the region, accounting for 46.20% of total orders from 1985 to 2024 [42]. Section 3: Key Companies and Opportunities - AVIC Xi'an Aircraft Industry Group is highlighted for its strategic position in the domestic large aircraft industry, benefiting from both military and civilian demand [54][60]. - The report suggests that companies with strong military aircraft models, such as AVIC Chengfei and AVIC Shenyang Aircraft Corporation, are well-positioned to capitalize on the growing military trade opportunities [50][51]. Section 4: Technological Advancements - The report discusses the advancements in military technology, particularly the development of high-end military aircraft and the increasing importance of radar systems in modern warfare [43][46]. - It notes that the demand for advanced military equipment is expected to rise due to the ongoing geopolitical conflicts, with a focus on the need for high-performance aircraft and precision-guided munitions [50].