GF SECURITIES·2026-03-08 08:23Core Insights - The defense budget is set to increase by 7% year-on-year, with a total of 1,909.561 billion RMB for 2026, slightly down from 7.2% in 2025. Aerospace has been designated as a new emerging pillar industry [5][13] - The six emerging industries are projected to reach a combined output of nearly 6 trillion RMB by 2025, with expectations to double by 2030 [5][13] - The commercial aerospace sector, including large aircraft and space data centers, is experiencing significant growth, with government support for projects like the C919 and C929 aircraft [5][14] Investment Strategy - Focus on companies that align with the "S-curve" evolution, emphasizing supply chain reform and automation trends. Key companies include AVIC Engine, AVIC Xi'an Aircraft, and Aerospace Electronics [5][15] - Target companies in the expansion phase of the "S-curve," particularly those involved in military trade and commercial aerospace, such as Guorui Technology and China Power [5][15] - Explore new cycles in emerging industries, focusing on commercial aerospace, AI, and quantum computing, with companies like Ruichuang Micro-Nano and Fuhua [5][15] Company Valuation and Financial Analysis - AVIC Engine (600893.SH): Current price 61.18 CNY, target value 44.47 CNY, with an expected EPS of 0.22 for 2025 [6] - AVIC High-Tech (600862.SH): Current price 26.58 CNY, target value 31.53 CNY, with an expected EPS of 0.90 for 2025 [6] - Aerospace Materials (688563.SH): Current price 69.48 CNY, target value 67.74 CNY, with an expected EPS of 1.40 for 2025 [6] - Plittech (688333.SH): Current price 102.15 CNY, target value 96.65 CNY, with an expected EPS of 0.73 for 2025 [6] - Unisoc (002049.SZ): Current price 75.16 CNY, target value 80.52 CNY, with an expected EPS of 2.01 for 2025 [6] Market Trends - The defense sector is seeing a shift towards high-end aerospace equipment production, with significant opportunities in the civil aviation market for engine localization [5][23] - The aerospace industry is expected to benefit from modernization efforts, with companies like AVIC Xi'an Aircraft positioned to capitalize on both military and civilian aircraft production [5][24] - The carbon fiber market for aerospace applications is projected to grow, with companies like Guangwei Composite Materials leading in supply [5][26]