Shenwan Hongyuan Securities·2025-12-18 10:51Investment Rating - The report maintains an "Overweight" rating for the defense and military industry, indicating a positive outlook compared to the overall market performance [26]. Core Insights - The defense and military sector has shown significant growth, with the Shenwan Defense Industry Index rising by 2.8% last week, outperforming major indices such as the Shanghai Composite Index and the CSI 300 [2][5]. - The report highlights the acceleration of order deliveries in December, with expectations for a surge in orders during the first quarter of the next year, driven by geopolitical uncertainties and increased demand for consumable military equipment [4][5]. - The report emphasizes the importance of focusing on investment opportunities in new main battle equipment, consumable weapons, military trade, and military intelligence, as well as thematic investments in commercial aerospace and controllable nuclear fusion [4][5]. Market Performance - Last week, the Shenwan Defense Industry Index outperformed the CSI 300 and the Shanghai Composite Index, ranking second among 31 Shenwan primary industry sectors [5]. - The average increase in the civilian-military integration index was 4.34%, indicating strong performance in this segment [5]. - Top-performing stocks in the defense sector included Aerospace Power (up 42.17%), Western Materials (up 40.98%), and Saiwei Electronics (up 29.37%) [5][12]. Valuation Changes - The current PE-TTM for the Shenwan Defense Industry is 82.24, indicating it is at a historically high valuation level, with significant differentiation among sub-sectors [13][19]. - The aerospace and aviation equipment sectors are noted to be at relatively high valuation levels since 2020 [19][20]. Key Investment Targets - Recommended stocks include high-end combat capabilities such as AVIC Shenyang Aircraft (600316.SH) and AVIC Xi'an Aircraft (600893.SH), as well as new quality combat capabilities like Unisoc (002049.SZ) and Chengdu Huami (688143.SH) [4][20][22].