GUOTAI HAITONG SECURITIES·2026-02-02 02:25Investment Rating - The report rates the military industry as "Overweight" [4] Core Insights - The military sector is expected to have a long-term positive trend, supported by the 20th National Congress of the Communist Party of China, which emphasizes achieving the centenary goal of building a strong military and modernizing national defense [7][8] - The military industry index fell by 7.60% from January 26 to January 31, underperforming the broader market by 7.16 percentage points, ranking 29th out of 29 sectors [12][13] - The training program for the Fujian aircraft carrier is progressing smoothly, with expectations that it will be capable of entering the Pacific for long-range training by 2026 [8][9] Summary by Sections Investment Highlights - The military industry is experiencing a downturn, but the Fujian aircraft carrier's training plan is advancing as scheduled [8] - The report highlights several companies for investment, including: 1. Assembly: AVIC Shenyang Aircraft, AVIC Xi'an Aircraft, Aero Engine Corporation of China, and High-Tech Infrared 2. Components: AVIC Optoelectronics, Zhimin Technology, Shaanxi Huada, Ruichuang Micro-Nano, and Unisplendour 3. Subsystems: Aerospace Electronics, Guorui Technology, Guobo Electronics, AVIC Avionics, North Navigation, and Aerospace Nanhu 4. Materials and Processing: Jiachitech, AVIC High-Tech, Western Materials, Aviation Materials, Hanya Technology, Guangwei Composite, Filihua, Huayin Technology, and Plit [9][10] Market Review - The military industry index underperformed the market, with a decline of 7.60% compared to a 0.44% drop in the Shanghai Composite Index and a 0.09% drop in the ChiNext Index [12][13] - The best-performing index was the China Securities National Security Index, which fell by 6.21% [14] - The defense information technology sector showed better performance, with notable gains from stocks like *ST Chengchang (+15.48%) and Western Materials (+13.02%) [16][21] Major News in the Military Industry - International tensions are escalating, with the U.S. increasing military presence in the Middle East amid rising tensions with Iran and threats from Houthi forces [25][26] - The Russian military has conducted airstrikes on Ukrainian energy infrastructure, resulting in injuries and power outages across multiple regions [26] - The report notes that the Fujian aircraft carrier is on track to achieve operational capabilities by 2026, which is seen as a positive development for China's naval capabilities [28]