Group 1 - The core viewpoint of the news is the release of the white paper "National Security in the New Era" by the State Council Information Office, which aims to explain the innovative concepts, practices, and achievements of China's national security work, enhancing international understanding of China's national security [1] - The military industry is expected to respond to national needs and expand its scope beyond traditional military business to include new domains and emerging non-traditional military fields, forming a new industry system for the new era [1] - The military sector's performance is nearing the bottom, with expectations of a recovery in Q1 2025, driven by the approaching centenary of the military and the completion of the "14th Five-Year Plan" tasks, leading to rapid growth in orders and performance [1] Group 2 - The military sector's recent short-term market movements have been event-driven, but it possesses long-term investment value, with potential for continued upward movement as orders stabilize and military trade continues to be fulfilled [1] - The military ETF (512660) is currently the largest and most liquid military sector ETF, tracking the CSI Military Index, which includes major military-related listed companies and reflects the overall performance of the military industry in the Chinese A-share market [2]

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]

Investment Rating - The report maintains a "Positive" investment rating for the military industry [2] Core Insights - The military sector is experiencing a bottoming out and marginal recovery, with new directions showing superior performance [9][15] - The J-35 supply chain is entering a phase of prosperity, with increased production capacity supporting the launch of new models [52][73] - The report highlights the importance of contract liabilities and inventory stability as indicators of demand recovery in the industry [27][95] Summary by Sections Military Sector Overview - The military sector's revenue growth from 2021 to Q1 2025 shows a decline, with a notable drop in net profit in 2024, but a recovery trend is observed in Q1 2025 [18][19] - The main track of the military sector includes traditional aircraft, engines, and missiles, with revenue growth rates declining but showing signs of recovery in Q1 2025 [19][23] J-35 Supply Chain - The J-35, China's second stealth fighter, is expected to have a strong export potential due to its competitive pricing and fully domestic production [55][61] - The company plans to invest 11 billion yuan in local relocation and production capacity expansion to support new model production [73][81] New Directions in the Industry - New directions such as military trade and new equipment are showing upward trends in revenue and profit growth, indicating a recovery in demand [38][48] - Companies like Tunan Co. are focusing on advanced metal materials and innovative business models to capture growth opportunities in the defense sector [99][102] Financial Performance - The report indicates that major manufacturers like AVIC Shenyang Aircraft Corporation have seen significant increases in contract liabilities, suggesting a positive outlook for future demand [27][95] - The financial metrics for the military sector show a narrowing of profit declines in Q1 2025, with a focus on maintaining stable inventory levels [19][28]