Minsheng Securities·2025-06-16 08:05Core Insights - The report indicates that 2025 is a pivotal year for the military industry, with a strong upward trend expected from 2025 to 2027, driven by demand recovery and strategic shifts in military capabilities [3][24][25] - The "dual new quality" concept is expected to lead market trends, focusing on new technologies and production capabilities that enhance military effectiveness [4][5] - The report emphasizes the importance of the third quarter of 2025 as a critical time for investment allocation, with military trade and new quality production capabilities gaining significant attention [2][5] Industry Overview - The military industry has shown signs of recovery in orders during the first half of 2025, although financial results have not yet reflected this improvement, with a 34% year-on-year decline in net profit for Q1 2025 [3][26] - The military industry index has remained relatively flat, with a 0.1% increase from January to June 2025, indicating a need for cautious optimism as demand begins to recover [11][15] - The report highlights the impact of geopolitical conflicts, such as the India-Pakistan conflict, which has intensified market focus on military trade and advanced equipment demand [4][25] New Quality Combat Power - The report identifies "new quality combat power" as a key focus for the upcoming "15th Five-Year Plan," emphasizing the need for advanced technologies and innovative military strategies [32] - Key areas of development include advanced aircraft, smart munitions, equipment informatization, and unmanned systems, which are expected to enhance operational effectiveness [32][41] - The report suggests that the evolution of military technology will require significant advancements in materials, such as stealth materials, to improve survivability and operational capabilities [33][37] New Quality Production Power - The report outlines four emerging areas of new quality production power: controllable nuclear fusion, low-altitude economy, domestic large aircraft, and commercial aerospace, each with distinct focus areas for investment [4][5] - Controllable nuclear fusion is highlighted as a critical energy development area, with significant advancements expected by 2025 [4][5] - The low-altitude economy is anticipated to benefit from favorable policies, while the domestic large aircraft sector is focused on supply chain security and production acceleration [4][5] Investment Recommendations - The report recommends focusing on specific companies within the military sector that are expected to perform well in the second half of 2025, particularly in guided weapons, military trade, and new quality combat power [5][18] - Notable companies to watch include Guoguang Electric, Hailanxin, and Aerospace South Lake, which have shown strong performance in the first half of 2025 [18][19] - The report emphasizes the importance of strategic positioning in the market as demand for advanced military equipment continues to rise due to geopolitical tensions [4][25]