Investment Rating - The report maintains a positive outlook on the military industry, suggesting it may enter a new upward cycle from 2025 to 2027 [6][5]. Core Insights - In Q1 2025, active funds have shifted to a low allocation in the military sector, marking a potential bottom signal for the industry [1][18]. - The scale of military-themed funds has decreased significantly, dropping nearly 50% from its historical peak [1][22]. - Active funds have increased their holdings across almost all sub-sectors, particularly in new materials and information technology [1][3]. Summary by Sections Fund Allocation Analysis - Active funds have reduced their allocation to the military sector for ten consecutive quarters, with a current low allocation of -0.21 percentage points [2][14]. - The total market value of military-themed funds has decreased by 8.30% to 32 billion yuan, down 47% from the historical high of 60.8 billion yuan [22][24]. - The top ten stocks held by military-themed funds account for an average of 56.53% of the fund's net asset value, indicating a decrease in concentration [22][25]. Industry Dominance and Fund Preferences - State-owned enterprises dominate the military sector, accounting for 70% of the market value, reflecting a focus on these entities by institutional investors [3][30]. - The allocation by industry chain shows that upstream companies hold the highest proportion at 49%, followed by assembly at 28% [3][31]. - Active funds have shown a preference for leading blue-chip stocks, with significant increases in holdings for companies like 中航光电 (AVIC) and 菲利华 (Feilihua) [4][34]. Changes in Fund Holdings - The number of funds holding top military stocks has increased, with 中航光电 (AVIC) and 菲利华 (Feilihua) seeing the most significant growth in fund count [34][35]. - The concentration of holdings among the top fifteen stocks has decreased to 68.95%, down 5.69 percentage points [25][26]. - The report highlights a shift back to blue-chip stocks after a period of focusing on new domains [4][5].

Group 1 - The defense sector is experiencing upward momentum due to increased military spending and geopolitical tensions, indicating a potential upward cycle in the military trade market [2] - The National Defense ETF (512670) has risen by 1.68%, reaching a new high of 3.808 billion yuan, reflecting strong investor interest in the defense industry [2] - Major companies in the defense sector, such as AVIC Chengfei, are expected to maintain high-quality development during the current equipment upgrade phase [2] Group 2 - As of April 30, 2025, the top ten weighted stocks in the CSI National Defense Index (399973) account for 43.61% of the index, indicating concentrated investment in key players [3] - The defense sector is entering a phase of net surplus in military trade, with significant opportunities for the export of domestically developed equipment [2] - Analysts predict that the performance of the defense sector is nearing its bottom, with expectations of recovery starting in 2025, supported by a series of order announcements since late 2024 [2]

Core Viewpoint - Taiping Fund announced the change of fund managers for the Taiping Rui'an Mixed Fund, with Su Daming replacing Chen Xiao and Shao Chuang due to work adjustments [2][3] Fund Manager Change - The new fund manager, Su Daming, has been with Taiping Fund since April 2016 and has prior experience in credit assessment and investment research [2][3] - Chen Xiao was the original fund manager since the fund's inception in November 2020, and Shao Chuang was appointed in January 2024 [3] Fund Performance - As of April 30, 2025, the net value of Taiping Rui'an Mixed A Fund has decreased by 10.02% since inception, with a 2.7% decline over the past three years and a 5.86% increase over the past year [3][4] - The fund's net asset value was approximately 303 million yuan as of the end of the first quarter of 2025, with a stock allocation of 34.86% and a bond allocation of 60.09% [4] Holdings and Concentration - The top ten holdings include companies such as Sanhua Intelligent Controls, Hengxuan Technology, and Tai Ling Micro [4] - A single institution holds 99.21% of the total fund shares, which raises concerns about potential concentrated redemptions and liquidity risks [4][5] Investment Strategy - The fund has been gradually reducing its risk asset positions and increasing its allocation to pure bond assets to achieve stable returns [5] - The equity holding structure will maintain a balanced growth style with a focus on technology and healthcare sectors, while also looking for opportunities in dividend assets [5]

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the military trade (military trade) industry, particularly China's military exports and the implications of geopolitical conflicts, especially between India and Pakistan [1][3][4][6][11]. Core Insights and Arguments - **Stock Market Performance**: Chengfei's stock price volatility reached ±20% after its backdoor listing through AVIC Electromechanical, indicating high market interest in its military assets [1][2]. - **Geopolitical Context**: The India-Pakistan conflict highlighted the complex relationship between Chinese military trade and international geopolitics, with Pakistan utilizing Chinese-made J-10 and JF-17 fighter jets during the conflict [1][4][5][7]. - **Export Strategy Shift**: China's military export strategy has evolved to focus on advanced equipment rather than downgraded versions, aiming for practical testing to enhance overall military capabilities [1][18]. - **Major Export Markets**: Pakistan is the largest recipient of Chinese military equipment, accounting for approximately 42% of China's military exports, which includes advanced systems like the J-10CE and JF-17 [1][8][9]. - **International Orders**: During the 2024 Zhuhai Airshow, China secured around $40 billion in orders, showcasing significant progress in military equipment exports [1][16]. Additional Important Content - **Market Dynamics**: The military industry is currently experiencing strong performance, with the CITIC Military Industry Index ranking first among all sectors, driven by strong reactions from companies in the Chengfei and military trade supply chains [2]. - **Future Opportunities**: The military trade market has potential for growth, especially if the U.S. experiences a significant decline in its military trade dominance, which could create a critical point for Chinese military exports [3]. - **Technological Developments**: The 2024 Zhuhai Airshow featured advanced military equipment like the J-35, indicating a push towards international markets [1][12][20]. - **Investment Recommendations**: Companies to watch include those in radar products (Aerospace Nanhu and Guorui Technology), missile sectors (Philihua, New Power, etc.), and fighter jets (Chengfei, AVIC Shenyang, etc.) due to their strategic importance and potential for market share growth [21][24]. Conclusion - The military trade industry is at a pivotal moment, influenced by geopolitical tensions and evolving export strategies. The focus on advanced military technology and significant international orders positions China favorably in the global military trade landscape.

Group 1 - The defense industry is supported by robust growth in national defense spending, showcasing a natural closed-loop property and a high degree of supply chain autonomy, making it a potential "safe haven" during the US-China tariff war [1][12] - The military industry is expected to see a significant improvement in performance by 2025, with current market conditions offering a favorable cost-performance ratio for investors [1][12] Group 2 - The defense industry encompasses six core areas: nuclear industry, aviation, aerospace, shipbuilding, weaponry, and electronics, forming a complete military industrial system in China, characterized by high entry barriers and stable demand [2] - The industry has shown a pattern of accelerated growth in the latter half of each five-year plan, with 2025 expected to be a peak year for the current five-year plan, indicating a potential turnaround in the industry's fundamentals [3][5] Group 3 - In 2024, the military industry is projected to achieve revenue of 465.7 billion yuan, a decrease of 3.5% year-on-year, with a net profit of 21.7 billion yuan, down 43.5% year-on-year, primarily due to delayed orders and price adjustments [7][8] - The first quarter of 2025 shows a revenue of 84.3 billion yuan, down 7.3% year-on-year, and a net profit of 4.9 billion yuan, down 32.5% year-on-year, indicating ongoing challenges in the industry [7][8] Group 4 - The military sector's gross profit margin for 2024 is 21.8%, down 2.5 percentage points year-on-year, while the net profit margin is 4.7%, down 3.3 percentage points year-on-year, reflecting pricing pressures and rising costs [7][9] - By the first quarter of 2025, the gross profit margin has improved to 23.8%, while the net profit margin is 5.8%, indicating signs of recovery as revenue scales up [9] Group 5 - The military industry is experiencing a positive trend in funding, with an increase in passive fund sizes and net inflows into ETFs, suggesting an improving financial environment [10] - The current price-to-earnings ratio of the military index is 60.26, with a significant drop in valuation percentiles following the disclosure of 2024 and Q1 2025 earnings, indicating high investment value in the sector [10] Group 6 - The military industry is expected to benefit from strong demand recovery in 2025, with several companies listed as potential investment opportunities, including Aerospace Electric (002025), North Navigation (600435), and others [12]

作者：周绘 出品：全球财说 2025年4月，A股各大指数普遍下跌，上证指数收于3279.03点，全月跌1.70%；深证成指收于9899.82点，全月跌5.75%；创业板指收于1948.03点，全月跌 7.40%。 5月6日，迎节后开门红，市场全天高开高走，上证指数涨1.13%，深成指涨1.84%，创业板指涨1.97%。沪深两市全天成交额1.34万亿元，较上个交易日放量 1668亿元。盘面上，市场热点良性轮动，个股涨多跌少，全市场近5000只个股上涨。 经济数据方面，4月制造业PMI为49.0%，比上月下降1.5个百分点；非制造业PMI和综合PMI分别为50.4%和50.2%，继续保持在扩张区间。受外部环境急剧变 化等因素影响，4月份制造业PMI有所回落，但高技术制造业等相关行业继续保持扩张，以内销为主的制造业企业生产经营总体稳定。 政策方面，围绕扩大内需提出多项政策措施。 4月7日，国务院印发《加快建设农业强国规划（2024－2035年）》，提出主要目标：到2027年，农业强国建设取得明显进展；乡村全面振兴取得实质性进 展，农业农村现代化迈上新台阶；稳产保供能力巩固提升，粮食综合生产能力达到1.4万亿斤，重要 ...

Group 1 - The China Securities Military Industry Index (399967) has shown a strong increase of 4.24% as of May 7, 2025, with notable gains in constituent stocks such as AVIC Chengfei (302132) reaching a 20% limit up, and Zhongyun Drone (688297) rising by 16.37% [1] - The leading military ETF (512680) has also increased by 4.23%, marking its third consecutive rise, with a trading volume of 87.04 million yuan and a turnover rate of 2.31% [1] - The latest scale of the military ETF has reached 3.686 billion yuan, a new high for the year, with the latest share count at 3.544 billion, also a six-month high [1] Group 2 - The top ten weighted stocks in the China Securities Military Industry Index as of April 30, 2025, include China Shipbuilding (600150) and Guoke Technology (002625), accounting for a total of 37.03% of the index [2] - Positive signals have emerged in the military sector since 2024, with expectations of increased contract announcements and related transaction amounts in 2025, indicating a recovery in the military fundamentals [2] - According to GF Securities, the EU's defense industrial strategy is shifting towards self-sufficiency, aiming for 50% of defense equipment procurement to be sourced internally by 2030, which may benefit qualified Chinese companies with production capacity [2]

Group 1 - The China Securities High-end Equipment Sub-index 50 has seen a strong increase of 3.55%, with notable gains from stocks such as AVIC Chengfei up 14.81% and Zhong UAV up 12.48% [1] - The High-end Equipment ETF (159638) has risen by 3.47%, marking a third consecutive increase [1] - The High-end Equipment ETF has recorded a turnover of 4.39% and a transaction volume of 51.2344 million yuan, with its latest scale reaching 1.145 billion yuan and shares totaling 1.528 billion, a new high for the year [3] Group 2 - The High-end Equipment ETF has experienced continuous net inflows over the past six days, with a maximum single-day net inflow of 11.0926 million yuan, totaling 16.9623 million yuan [3] - The index tracked by the ETF is currently at a historical low valuation, with a price-to-book ratio (PB) of 4.03, which is lower than 80.18% of the time over the past five years, indicating strong valuation attractiveness [3] - As of April 30, 2025, the top ten weighted stocks in the index account for 45.74% of the total, including companies like AVIC Optoelectronics and AVIC Shenyang Aircraft [3] Group 3 - The People's Bank of China announced an increase in the re-lending quota for technological innovation and technological transformation from 50 billion yuan to 80 billion yuan, supporting the implementation of "two new" policies [4] - The head of the Financial Regulatory Bureau emphasized the need for high-quality development of technology insurance to support major technological breakthroughs and promote insurance products in emerging fields such as robotics and low-altitude aircraft [4] - The low-altitude economy is expected to tap into a trillion-level blue ocean market, driven by policy support and technological upgrades, with significant market potential for low-altitude infrastructure [4] Group 4 - Investors can consider the China Securities High-end Equipment Sub-index 50 ETF linked fund (018028) to capitalize on industry rotation opportunities [5]

Summary of the Conference Call Industry Overview - The military industry is showing a downward trend, but the decline is narrowing, indicating signs of bottoming out. The revenue realization in the components segment is catalyzing the industry, with expectations for improved conditions in Q2 [2][4][10]. - The Longjiang Military Group categorizes over a hundred companies into main tracks (military aircraft engines, missiles) and new directions (new equipment, military trade, military-to-civilian transitions). The upstream components are recovering first, with improvements in cash flow and inventory for main manufacturers [2][5][6]. Key Insights - Q2 is expected to see a focus on emerging segments such as rocket forces, navy, army, and information support troops, with significant development potential following management system optimizations [2][8]. - The military industry is anticipated to accelerate recovery in 2025, driven by mobilization orders and systemic improvements, with missiles becoming a preferred investment choice [2][10]. - Military trade is benefiting from optimized national military trade management and global political changes, becoming a crucial aspect of the defense technology industry's international expansion [2][12][13]. Company-Specific Highlights AVIC Shenyang Aircraft Corporation (沈飞) - Selected as the "gold stock" for May due to low holdings, minimal competition, low valuation, and potential. The lack of disclosed 2025 operational targets enhances its safety margin and presents a contrarian investment opportunity [2][3][15][16]. - The company is currently valued at a static P/E ratio of around 30 times, which is at the lower end of its historical valuation range. Expectations for increased production tasks in 2025 are based on improved cash flow and contract signing [17][20]. - Future growth is supported by new aircraft models entering production phases, with a projected ROE close to 20% and significant asset scarcity [18][21]. Tunan Co., Ltd. (图南股份) - Tunan has shown improvement in Q1 2025 after a significant decline in Q4 2024. The company is expected to achieve approximately 330 million yuan in revenue in 2025, with a compound annual growth rate of 35% to 40% over the next two years [2][29]. - The company specializes in high-temperature alloy materials, with a strong focus on casting and deformation alloys, and is gradually extending its business into downstream products [23][26]. - Tunan's profitability is expected to improve significantly, with projections indicating a doubling of revenue and profit over the next three years [28][29][30]. Additional Important Points - The military industry is experiencing a structural shift with a focus on unmanned systems and advanced technologies, which will likely reshape operational dynamics and market opportunities [21][22]. - The management of military companies is increasingly focused on optimizing production and expanding capacity to meet future demands, particularly in the context of national defense strategies [20][14]. - The competitive landscape in the military sector remains relatively stable due to strong regulatory frameworks, which may provide a clearer path for companies to capitalize on emerging opportunities [11][12].

Investment Rating - The report maintains a "Positive" investment rating for the defense and military industry [3] Core Insights - The industry is experiencing a bottoming out phase due to multiple factors, but signs of improvement were observed in Q1 2025, particularly in upstream components and new directions [11][13] - Profitability has slightly fluctuated due to various influences, with ROE constrained by asset efficiency and net profit margin needing improvement [53][56] - Traditional main tracks show clear signs of recovery, while new directions are in the early stages of industrialization but exhibit initial growth potential [90][91] Summary by Sections Industry Overview - The military industry faced a decline in revenue and profit growth in 2024, but Q1 2025 showed a narrowing of profit decline to -24.6% [19][20] - The main track's revenue growth was affected by contract signing and delivery schedules, with a notable profit drop in Q4 2024, followed by a recovery in Q1 2025 [20][21] Main Track Performance - Upstream components are showing early signs of recovery, with revenue growth rates for upstream, midstream, and downstream segments varying significantly [25][29] - Downstream manufacturers experienced short-term performance pressure due to contract signing delays, but some companies like Hongdu Aviation showed strong growth [29][30] Profitability Analysis - The overall profitability of the military sector slightly decreased in 2024, with a marginal improvement in Q1 2025 [56][58] - The main track's profitability was impacted by price adjustments and demand fluctuations, with a slight recovery noted in Q1 2025 [58][61] New Directions - New directions in the industry, such as military trade and new equipment, are showing upward trends in Q1 2025, indicating potential for growth [101][110] - Specific segments like infrared and ammunition within new equipment are experiencing significant revenue growth, reflecting high market demand [104][110] Future Outlook - The report emphasizes the importance of selecting companies with enhanced product capabilities, increased penetration rates, and higher average transaction values as the industry approaches the end of the 14th Five-Year Plan [117][118] - Key investment opportunities are identified in companies like Aerospace Electric and Feiliwa, which are expected to benefit from the upcoming military spending and technological advancements [117][118]