Investment Rating - The industry is rated positively, with expectations of overall returns exceeding the CSI 300 index by more than 5% in the next six months [37] Core Insights - China's defense budget has maintained a growth rate of around 7%, with defense spending accounting for less than 1.5% of GDP, which is below the average of major military powers. There is significant room for growth in defense spending, which is expected to outpace GDP growth in the long term. The year 2025 marks the end of the "14th Five-Year Plan," and the industry is anticipated to emerge from a two-year period of stagnation, entering a phase of comprehensive recovery. As orders normalize and are gradually released, the military industry sector may experience a "Davis Double Play" phase of performance improvement and valuation enhancement. It is recommended to focus on leading companies in advanced fighter jets, low-altitude economy, domestic large aircraft, satellite internet, and deep-sea technology, which have favorable competitive landscapes and high technological barriers [4][9] Summary by Sections Industry Insights - The defense budget growth rate is around 7%, with spending below 1.5% of GDP, indicating potential for significant growth. The military sector is expected to recover in 2025, with a focus on advanced technologies and leading companies [4][9] Market Performance - The aerospace and defense index increased by 7.95% this week, while the CSI 300 index rose by 2.00%. For the month, the aerospace and defense index saw an 18.24% increase compared to a 7.15% rise in the CSI 300 index [10] Industry News - India and Pakistan have agreed to a comprehensive ceasefire, which may impact regional defense dynamics [15] - The "China-Singapore Cooperation-2025" naval joint exercise has commenced, highlighting ongoing military collaborations [17] - NATO is conducting large-scale military exercises near the Russian border, involving approximately 16,000 troops from 12 countries [18] - The U.S. is providing decommissioned F-16s to Ukraine for parts, emphasizing ongoing military support amid the conflict [19] - Europe has initiated a project for future main battle tank technology, involving 26 military enterprises and research institutions [20] Company Tracking - Long光华芯 has received government subsidies totaling approximately 10.4 million RMB [23] - 派克新材 plans to reduce shareholding by up to 3% due to personal needs [24] - 亚光科技 signed a pre-production agreement worth 10.05 million RMB with a special institutional client [25] - 联创光电 has repurchased 113,400 shares, representing 0.03% of its total share capital [26] - 烽火电子 completed a share buyback of 1,344,300 shares, amounting to approximately 9.6 million RMB [27]

Investment Rating - The industry investment rating is "Positive (Maintained)" [5] Core Viewpoints - The military industry is experiencing a short-term performance bottoming out, with revenue and profit under pressure in 2024 and Q1 2025. The overall revenue for the military sector is projected to be 578.2 billion yuan in 2024, a year-on-year decrease of 1%, while the net profit attributable to shareholders is expected to be 19.5 billion yuan, down 39% year-on-year [1][2] - The report highlights three main investment themes for 2025: new domains and new qualities, military trade, and restructuring [3][4][6] Summary by Sections Financial Performance - The military sector's revenue and profit are both declining, with Q1 2025 revenue at 110.4 billion yuan, flat year-on-year, and net profit at 5.8 billion yuan, down 12% year-on-year. Excluding 11 shipbuilding companies, the remaining 124 companies are expected to see a revenue decrease of 4% and a net profit decrease of 54% in 2024 [1][2] - The gross margin for the military sector in 2024 is projected to be 20.8%, down 2.4 percentage points year-on-year, while the net margin is expected to be 3.5%, down 3.5 percentage points year-on-year [2] Sector Breakdown - In Q1 2025, the aerospace equipment sector is expected to see a revenue decline of 4% and a net profit decrease of 20%. The military electronics sector is projected to experience a revenue drop of 12% and a net profit decrease of 111% in 2024 [3][4] - The report indicates that the growth in contract liabilities and inventory in certain areas suggests strong downstream demand, which is expected to lead to performance recovery in Q2 2025 [3][4] Investment Recommendations - The report recommends focusing on downstream main engine manufacturers and high-barrier, well-structured midstream targets, including companies like China Shipbuilding, AVIC, and others in the aerospace and military electronics sectors [7][9] - The new domains and new qualities are highlighted as significant future equipment directions, including drones and commercial aerospace, which are expected to accelerate in 2025 [3][4][9]

[Table_Info1] 国防军工 [Table_Date] 发布时间：2025-04-28 $$i k\neq\pm i k$$ 航发集团召开集体业绩说明会，航发赛道保持高景气度 报告摘要： [Table_Summary] 板块回顾：上周申万国防军工指数上涨 0.15%，上证指数上涨 0.56%，深 证成指上涨 1.38%，创业板指数上涨 1.74%，沪深 300 指数上涨 0.38%， 国防军工板块涨幅在 31 个申万一级行业中排名第 22。截至周五收盘， 申万国防军工板块 PE(TTM)为 72.51 倍，各子板块中航天装备为 104.77 倍，航空装备为 59.03 倍，地面兵装为 115.87 倍，航海装备为 83.42 倍， 军工电子为 82.55 倍。 航发集团召开集体业绩说明会。4 月 25 日，中国航发控股上市公司 2024 年度集体业绩交流活动在成都举行。航发动力 2024 年营收 478.8 亿元， 同比增速 9.48%；归母净利润 8.6 亿元，同比下滑 39.48%，主要原因系 公司在航空发动机关键技术领域的高研发投入导致成本上升；其次，原 材料价格波动和来自供应链端的压力对公司生 ...

Investment Rating - The report maintains a rating of "Outperform the Market" for the defense and military industry [4] Core Insights - The renaming of AVIC Electromechanical to AVIC Chengfei marks another major aircraft manufacturing company under AVIC completing its capitalized listing, indicating potential opportunities in state-owned enterprise reforms and mergers this year [11][12] - The military industry is expected to see a recovery in performance by 2025, with positive signals emerging since late 2024, including contract announcements from core companies [12][13] - The military sector is transitioning from a phase of performance expectations to actual performance realization, with a significant increase in stock prices reflecting new growth expectations [13] Summary by Sections 1. Core Insights - The stock code change from AVIC Electromechanical to AVIC Chengfei signifies the completion of its capitalized listing, with the transaction value of AVIC Chengfei's 100% equity at approximately 1,743.91 million yuan [11][12] - The total share capital of the listed company increased from 590,760,499 shares to 2,676,782,376 shares [11][12] - The report anticipates numerous opportunities in state-owned enterprise mergers and asset injections this year [11][12] 2. Investment Strategy - The report suggests focusing on three investment lines: 1. Traditional military sectors with expected order recovery and performance support, including aerospace, shipbuilding, and aviation industries [13][15] 2. New domains characterized by low cost, intelligence, and systematization, such as low-cost precision-guided munitions and unmanned systems [13][15] 3. Reform and overseas expansion, targeting companies with asset integration expectations and competitive military trade markets [15] 3. Recommended Stocks - Traditional military direction: AVIC Power, AVIC Control, AVIC Materials, and others [15] - New domain and new quality direction: companies like Gaode Infrared, Beifang Navigation, and others [15] - Reform and overseas direction: Guorui Technology and Construction Industry [15] 4. Market Performance - The military industry index has shown a significant increase, outperforming the general market index, indicating a positive trend in the sector [24][26] - The military sector's overall valuation is at 75.39 times, positioned at the historical median, suggesting potential for growth [30]