Group 1 - The military industry sector experienced a significant rise, with construction industry stocks hitting a historical high [1] - Aerospace power and other related companies saw substantial gains, with stocks like Superjet and West Testing rising over 10% [1] - The report from Dongfang Securities indicates that certain upstream sectors have shown improved performance in Q2, enhancing the sector's certainty [1] Group 2 - The recovery in the military trade sector is expected to become a second growth driver as the "14th Five-Year Plan" approaches its conclusion [1] - The overall sentiment in the military industry is improving, with more positive changes being realized [1]

Investment Rating - The report maintains a "Positive" investment rating for the defense and military industry [5]. Core Viewpoints - The integrated combat system of China is expected to rapidly open up the market, with military trade likely to continue increasing [16][17]. - In Q2 2025, active funds have significantly increased their overweight position in the military sector, with expectations for further increases focusing on military trade and new combat directions [21]. - The current market position remains optimistic for the military sector, with upstream components and key materials expected to benefit from demand amplification effects [22]. Summary by Sections 1.1 Military Trade and Equipment Strength - The Weapon Industry Group showcased China's military trade capabilities in unmanned and counter-unmanned systems, indicating a growing demand for military trade [9][16]. - The demonstration included various advanced equipment such as the BZK-005E drone and the Tianlong 100 air defense missile system, highlighting the capabilities of China's integrated combat system [17][18]. 1.2 Fund Allocation Trends - In Q2 2025, the overweight position of active funds in the military sector increased to 0.92 percentage points, up from 0.57 percentage points in Q1 2025, indicating a growing confidence in military trade and new combat technologies [21][22]. - The report suggests that the market's understanding of the marginal elasticity of military trade is still insufficient, with potential for performance releases to strengthen military trade logic [21]. 1.3 Current Market Outlook - The military sector has shown positive performance since July, with many sub-sectors still at low levels, suggesting significant configuration value [22]. - The report emphasizes the importance of upstream components and key materials in weapon development and production, which are expected to benefit from increased demand [22]. Appendix: Market Performance and News - The defense and military industry index rose by 1.28% but underperformed compared to the broader market indices [24]. - Key military companies have reported significant growth in their half-year earnings, with many companies showing rapid increases in net profits [44].

Investment Rating - The industry investment rating is "Overweight" (看好) for the defense and military industry, marking the first rating of its kind [1]. Core Insights - The report highlights that the ongoing geopolitical complexities, such as the recent conflict between Thailand and Cambodia, are likely to sustain military trade benefits, leading to an increase in the valuation of the military industry [3]. - China's share in the international arms trade market is expected to continue rising, with a reported market share of 5.8% from 2019 to 2023, as the demand for advanced weaponry remains high [4]. - Sub-sectors such as unmanned equipment and rocket artillery are anticipated to benefit significantly from international conflicts and military trade orders, with specific companies identified as potential beneficiaries [5]. Summary by Sections Industry Overview - The defense and military industry is experiencing a favorable outlook due to escalating geopolitical tensions and increased military spending [3][4]. Market Dynamics - The international transfer of major weapons has increased by 3.2% from 2019 to 2023 compared to the previous five-year period, indicating a robust demand for military equipment [4]. Investment Opportunities - Key beneficiaries in the unmanned equipment sector include companies like Jingpin Special Equipment and Aerospace Rainbow, while ammunition-related companies such as Gaode Infrared and Guangdong Hongda are also highlighted as potential investment opportunities [5].

Group 1: Core Insights - The report highlights that 2025 is a pivotal year for the military industry, with a recovery in performance expected in the second half due to the release of delayed orders and the initiation of the 14th Five-Year Plan [5][6] - The global geopolitical landscape is entering a period of turmoil, which is anticipated to drive an unprecedented increase in military spending, benefiting China's military exports [5][6] - The Taiyuan Satellite Launch Center is positioned to play a crucial role in satellite internet construction, with its capabilities expected to enhance the deployment of low Earth orbit satellite constellations [5][6] Group 2: Industry Analysis - The non-bank financial sector is experiencing a positive trend, with 26 listed brokerages reporting a net profit growth rate exceeding 40% for the first half of the year, driven by increased trading activity and investment banking services [7] - The new materials sector has shown a mixed performance, with the new materials index rising by 1.37%, while specific sub-sectors like synthetic biology and industrial gases have seen notable increases [8] - The report emphasizes the importance of regulatory measures in the new energy vehicle industry to curb irrational competition, which is expected to improve profitability across the supply chain [8]

Investment Rating - The report maintains a "Positive" outlook for the defense and military industry, indicating a favorable investment environment [5]. Core Insights - The military industry is expected to see a significant increase in fund allocation, with a focus on military trade and new combat capabilities. The report suggests that the military trade sector will continue to catalyze growth, and there is still room for upward movement in holdings [2][34]. - The report highlights that the pessimistic expectations for the military industry's upstream have already been reflected in stock prices, and an increase in market confidence regarding the sustainability of the industry will likely enhance upstream holdings [34]. Summary by Sections 1. Fund Allocation Trends - In Q2 2025, the active funds' heavy allocation in the military sector increased significantly, with a rise in the allocation ratio from 0.57 percentage points to 0.92 percentage points. The total market value of active funds in the military sector grew by 20.77% [12][8]. - The report notes that the allocation ratio for component stocks decreased significantly, but it is expected to rebound as orders materialize and market conditions improve [18][22]. 2. Focus Areas for Investment - The report recommends focusing on specific sub-sectors within the military industry, including: - Military Electronics: Companies like Zhenhua Technology (000733, Buy), Aerospace Electronics (002025, Buy), and others [2][34]. - Key Materials and Components: Companies such as Western Superconducting (688122, Buy) and others [2][34]. - Engine Chain: Companies like Aero Engine Corporation (600893, Not Rated) and others [2][34]. - Military Trade: Companies such as AVIC Shenyang Aircraft Corporation (600760, Not Rated) and others [2][34]. - New Quality Productivity: Companies like Aerospace Electronics (600879, Not Rated) and others [3][34]. 3. Market Dynamics - The report indicates that the military trade business is expected to accelerate, with a positive outlook for military trade stocks. The active funds are increasingly focusing on sectors benefiting from military trade and new combat capabilities [7][22]. - The report emphasizes that the market's understanding of the marginal elasticity of military trade for military enterprises is still insufficient, suggesting that future catalysts and performance releases will strengthen the military trade logic [22][34].

Group 1 - The report indicates that 2025 is a pivotal year for the military industry, with delayed orders from the 14th Five-Year Plan gradually being released, leading to improved demand and a recovery in performance expected in the second half of 2025 [2][13] - The military industry is anticipated to enter a new growth phase due to the ongoing geopolitical tensions and the upcoming 15th Five-Year Plan, which will drive military spending upward [3][24] - The report highlights that the military trade market is experiencing heightened expectations, particularly influenced by events such as the 2024 Zhuhai Airshow and the ongoing India-Pakistan conflict [2][3] Group 2 - The report emphasizes the importance of the Taiyuan Satellite Launch Center in the future development of satellite internet, with its capabilities being comparable to or even superior to those of Vandenberg Space Force Base [4][24] - The military industry is recommended to focus on the missile weapon industry chain, new aviation equipment industry chain, and unmanned equipment industry chain, with specific companies highlighted for their strategic positions [4][6] - Key companies to watch include Beifang Navigation and Aerospace Electric in the missile weapon industry chain, AVIC Shenyang Aircraft Corporation and AVIC High-Tech in the new aviation equipment industry chain, and Inner Mongolia First Machinery Group in the unmanned equipment industry chain [6][4] Group 3 - The military industry has shown a significant performance recovery, with the index rising by 8.85% compared to the beginning of 2025, driven by improved market sentiment and military trade expectations [14][20] - The report notes that the military industry has maintained a high valuation level, with a PE/TTM ratio of 83X, indicating strong institutional interest and a potential for further growth [17][20] - The military industry is expected to benefit from the global trend of increasing military expenditures, with China's defense industry poised to reshape the high-end military trade market [3][24]

Group 1 - The military industry sector continues to show strong performance, with companies like Steel Research High-Tech and New Yu Guo Ke rising over 10% [1] - Other companies in the sector, including Holley Wo, Hongdu Aviation, Changcheng Military Industry, Chenxi Aviation, and AVIC Shenyang Aircraft Corporation, also experienced gains [1] - According to Zheshang Securities, geopolitical conflicts are expected to persist into 2025, leading to practical testing of China's military trade export equipment in overseas conflicts, which may result in a revaluation of domestic defense and military enterprises [1]

Summary of Key Points from Conference Call Records Company and Industry Overview - **Company**: 中航西飞 (AVIC Xi'an Aircraft Industry Group) - **Industry**: Military Aviation and Defense Core Insights and Arguments - The military industry is currently stabilizing, with military trade showing strong performance, particularly benefiting companies like 中航沈飞 (AVIC Shenyang Aircraft Corporation) due to improvements in China's weapon supply system and increased levels of high-end and independent production [2][5] - 中航西飞 has competitive advantages in the transport and special aircraft sectors, with the 运 20 (Yun-20) transport aircraft showing significant potential in the 200-ton maximum takeoff weight market, and the 运油 20 (Yun-20 tanker) also having export potential [2][7] - Military trade orders significantly enhance the profitability of main airports, with gross margins not constrained by domestic pricing policies, leading to net margins potentially ten times higher than domestic levels [2][9] - 中航西飞 is a core supplier for the C919 aircraft, producing key components valued at approximately 80-90 million RMB per aircraft, with accelerated deliveries expected following the resumption of U.S. engine shipments [2][12] - The 运 20 transport aircraft is competitive internationally, with limited production from competitors like the U.S. C17 and Russia's Il-76, allowing for a potential gross margin of 27% and a net margin of about 22% if scaled exports are achieved [2][14] Management Changes and Market Communication - 中航西飞 underwent a management reshuffle, electing 韩晓军 as chairman, which has led to a significant increase in external communications, with a 9-fold increase in announcements in 2024 compared to 2023 [2][10][11] Military Trade and Export Potential - The military trade direction has shown remarkable performance, with increasing self-reliance in aircraft manufacturing leading to a steady rise in export ratios [5][6] - Companies like 洪都航空 (Hongdu Aviation) and 中直股份 (AVIC Helicopter) have notable military trade advantages, with various aircraft and missile systems successfully exported [8] Financial Performance and Market Trends - As of July 20, 2025, 32 companies in the military sector reported earnings forecasts, with 56.25% showing year-on-year growth, although some key players like 航发动力 (Aero Engine Corporation of China) and 中航重机 (AVIC Heavy Machinery) experienced declines [4] - The military trade orders are expected to significantly boost the performance of companies like 中航西飞 and 中航沈飞, with potential gross margins exceeding 30% [9] Industry Developments - The demand for anti-drone equipment is rising, with various Chinese companies actively developing systems to meet this need, indicating a competitive landscape in military technology [15] Company Specific Developments in Electronics - **Company**: 菲利华 (Fihua) - **Industry**: Quartz Electronic Fabric for High-End PCB - 菲利华 is expanding its production capacity for quartz electronic fabric to meet the increasing demand for high-speed transmission, with significant advantages in raw materials and weaving processes [3][16][18] - The company has successfully developed new electronic fabric that meets MA9 standards and is currently testing samples with major clients [21] Future Plans - 菲利华 plans to significantly expand its production capacity for new electronic fabrics, with a goal of increasing weaving machine numbers from 10 to 300 by mid-2028 [20] This summary encapsulates the key points from the conference call records, highlighting the competitive landscape, financial performance, management changes, and future plans of the companies involved.

智通财经7月21日电，军工板块延续上周强势，新余国科20CM涨停，抚顺特钢触及涨停，此前建设工 业3连板，晶品特装、邵阳液压、内蒙一机、洪都航空涨超5%。消息面上，浙商证券认为，2025年地缘 政治冲突不断，我国军贸出口装备在海外冲突中得到实战检验，在军贸领域引领下，我国国防军工企业 价值有望得到重估。 军工板块延续强势 新余国科20CM涨停 ...

Investment Rating - The report maintains a "Positive" investment rating for the defense and military industry [4] Core Insights - The report highlights the increasing demand for advanced, domestically produced military equipment, which is expected to enhance China's military trade capabilities [26][72] - The performance of major companies in the industry is showing signs of recovery, particularly in the upstream components sector, with many companies reporting positive earnings forecasts [11][22] - The report emphasizes the strategic importance of companies like AVIC Xi'an Aircraft Industry Group (中航西飞) and AVIC Chengfei (中航成飞) in the context of military exports, particularly with their advanced aircraft models [36][42] Summary by Sections Performance Forecast - As of July 20, 2025, 32 companies have released performance forecasts, with a significant number indicating positive growth in their second-quarter earnings, particularly in the upstream components sector [16][18] - The report notes that 56.25% of the companies forecasted year-on-year growth for Q2 2025, while 50% indicated quarter-on-quarter growth [18] Military Trade - The report discusses the shift towards high-end military trade, driven by the development of domestically produced aircraft such as the J-10 and J-35, which are now export-ready [28][72] - AVIC Chengfei is highlighted as a key player with its J-10 model, which has seen increased international interest, particularly from Indonesia [36][42] - AVIC Xi'an is noted for its Y-20 transport aircraft, which is positioned to become a leading model in the military transport market due to its competitive specifications [46] Company Highlights - AVIC Xi'an is recognized for its production of large military transport aircraft and is expected to benefit from the growing demand for such models [42][46] - AVIC Chengfei is acknowledged for its successful export of advanced military aircraft, with the J-10 model being a standout performer in international markets [36][42] - The report also mentions the potential for companies like Hongdu Aviation (洪都航空) and AVIC Helicopter (中直股份) to expand their export capabilities with their respective aircraft and missile systems [47][50] Market Trends - The report indicates a trend of increasing military trade demand due to global conflicts, which is expected to drive growth in the industry [72][71] - The military trade landscape is evolving, with a focus on high-quality, domestically produced equipment that meets international standards [72][71]