Investment Rating - The report maintains an "Overweight" rating for the defense and military industry, indicating a positive outlook compared to the overall market performance [26]. Core Insights - The defense and military sector has shown resilience, with the Shenwan Defense Military Index rising by 6% last week, outperforming major indices such as the Shanghai Composite Index and the CSI 300 [1][5]. - The report suggests that the military sector is entering a recovery phase, driven by accelerated order deliveries and improved performance expectations for the fourth quarter [4]. - The "14th Five-Year Plan" is expected to enhance the quality and quantity of military capabilities, indicating a new growth cycle for the industry [4]. - There is a significant investment opportunity in the military sector due to increasing geopolitical uncertainties and rising demand for consumable military equipment [4]. - The report highlights the importance of focusing on new combat equipment, consumable weapons, military trade, and military intelligence as key investment areas [4]. Market Review - Last week, the Shenwan Defense Military Index outperformed the market, with a 6% increase, ranking second among 31 major industry sectors [5]. - The average increase for the civilian-military integration index was 8.45%, indicating strong performance in this segment [5]. - Top-performing stocks in the defense sector included Shenjian Co. (61.2%), Aerospace Engineering (43.39%), and China Satellite (36.24%) [12]. Valuation Changes - The current PE-TTM for the Shenwan Defense Military Index is 88.65, indicating it is in the upper range historically, suggesting potential for further growth [13][19]. - The report notes a divergence in valuations among sub-sectors, with aerospace and aviation equipment showing relatively high PE valuations since 2020 [13][19].

12月16日，国防军工板块大幅回调，场内热门国防军工ETF（512810）跌超2%。昨日该ETF场内价格 创下近两个月新高。 | 分时 多日 1分 5分 15分 · | | | | | | F9 盘前盘后 露加 九转 阅班 工具 (2 > | | 国防空工程TF O | | 512810 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 0.78 | | | | 512810[國防室工ETF] 09:45 价 0.704 股跌 -0.016(-2.22%) 均价 0.706 成交量 | | | | 0.704 | | -0.016 -2.22% | | | | | | | | | | SSE CNY 9:45:16 交易中 | | 通販7 0 + | | 0.731 | | | | | | | 1.57% | 净值走势 | | 华盛中证室工日 | | | | | | | | | | લુકાર | 36,97% 贬菱 | 155687 | | 0.726 | | | | | | | 0.7996 | 農田 | 0.7 ...

Investment Rating - The report maintains a "Positive" outlook on the defense and military industry, indicating an expectation of strong performance relative to the overall market [3][23]. Core Insights - The report anticipates accelerated task deliveries in Q4, leading to improved performance compared to previous quarters. The upcoming orders during the "14th Five-Year Plan" period are expected to be a catalyst for investment [3]. - Geopolitical uncertainties are driving increased demand for consumable military equipment and military trade, presenting significant investment opportunities. The global military trade market has shown a notable expansion in potential demand for Chinese military equipment, particularly in the Middle East and Asia [3]. - The report suggests a focus on new main battle equipment, consumable weapons, military trade, and military intelligence as key investment areas [3]. - The military industry is entering a new cycle of quality improvement and growth, as outlined in the "14th Five-Year Plan" [3]. - The report highlights a significant recovery in performance expected in Q4, with military orders experiencing a pulse-like growth since Q1 of this year [3]. Market Review - Last week, the Shenwan Defense and Military Industry Index rose by 2.85%, while the CSI Military Leaders Index increased by 1.52%. In comparison, the Shanghai Composite Index rose by 1.4%, and the CSI 300 Index increased by 1.64%. The Shenwan Defense and Military Industry Index underperformed the ChiNext Index but outperformed the CSI 300 and Shanghai Composite Index [4][10]. - The average increase in the CSI Civil-Military Integration Index was 4.97%, indicating strong performance in this segment [4]. - The top five performing stocks in the defense and military sector last week were: - Saiwei Electronics (44.85%) - TeFa Information (34.07%) - Leike Defense (32.3%) - Aerospace Power (32.22%) - Zhongtian Rocket (21.6%) [10]. - Conversely, the bottom five performing stocks were: - Beihua Co. (-11.59%) - Guorui Technology (-4.84%) - Yaxing Anchor Chain (-3.56%) - Chenxi Aviation (-3.2%) - Aileda (-2.71%) [11]. Valuation Changes - The current PE-TTM for the Shenwan Military Industry Index is 77.60, placing it in the upper range historically, with a valuation percentile of 65.76% since January 2014 and 92.45% since January 2019. The aerospace and aviation equipment sectors are noted to be at relatively high valuation levels since 2020 [12][16].

Investment Rating - The report maintains an "Overweight" rating for the defense and military industry, indicating a positive outlook compared to the overall market performance [23]. Core Insights - The defense and military sector is expected to see accelerated task deliveries in Q4, with a potential increase in orders towards the end of the year, serving as a catalyst for investment [3]. - Geopolitical uncertainties are driving demand for consumable military equipment and military trade, presenting significant investment opportunities [3]. - The report highlights a strong correlation between supply and demand in the global military trade market, particularly in the Middle East and Asia, which is expected to continue [3]. - Key investment areas include new main battle equipment, consumable weapons, military trade, and military intelligence [3]. - The report emphasizes the importance of monitoring the performance of specific stocks within the military sector, particularly those related to high-end combat capabilities and new quality combat forces [3]. Market Review - Last week, the Shenwan Defense and Military Index rose by 2.85%, while the CSI Military Leaders Index increased by 1.52%. In comparison, the Shanghai Composite Index rose by 1.4%, and the CSI 300 Index increased by 1.64% [4][11]. - The top five performing stocks in the defense and military sector were: - Saiwei Electronics (44.85%) - TeFa Information (34.07%) - Leike Defense (32.3%) - Aerospace Power (32.22%) - Zhongtian Rocket (21.6%) [11]. - Conversely, the bottom five performing stocks were: - Beihua Co. (-11.59%) - Guorui Technology (-4.84%) - Yaxing Anchor Chain (-3.56%) - Chenxi Aviation (-3.2%) - Aileda (-2.71%) [12]. Valuation Changes - The current PE-TTM for the Shenwan Military Sector is 77.60, indicating it is in the upper range historically, with a valuation percentile of 65.76% since January 2014 and 92.45% since January 2019 [12][13]. - The report notes a slight differentiation in valuations among sub-sectors, with aerospace and aviation equipment showing relatively high PE valuations since 2020 [12].

Core Viewpoint - The domestic satellite industry, represented by satellite constellation construction, is expected to accelerate significantly, with a focus on the transition of advanced combat-related equipment from research and development to mass production and scaling up [1] Group 1: Industry Trends - The shift from mechanization to informationization and then to intelligentization in military equipment is highlighted as a crucial development direction [1] - Future intelligent upgrades will encompass various military domains, including aircraft, missiles, tanks, unmanned combat units, aircraft carriers, and underwater equipment [1] Group 2: Investment Opportunities - There are anticipated investment opportunities related to military informationization, intelligentization, and unmanned equipment, as the defense and military industry is expected to experience an upward trend in prosperity and accelerated innovation in the medium term [1]

Summary of Key Points from Conference Call Records Industry Overview - The military industry in China is mature and has significant international market potential, with foreign trade becoming a focal point [1][2] - The end of the 14th Five-Year Plan has catalyzed policies, leading to a recovery in upstream military electronics orders, although challenges remain [1][2] - The 15th Five-Year Plan will commence in 2026, with a goal of military modernization by 2027, emphasizing the need for new combat capabilities [1][2] Core Insights and Arguments - Increased global military equipment demand due to rising geopolitical tensions and conflicts, validating the performance of domestic equipment in international markets [1][2] - The integration of AI in military applications is driving modernization, with China aiming for AI development goals by 2030 [1][2][5] - The 2025 military parade showcased advanced military technologies, including hypersonic weapons and unmanned systems, indicating a shift towards joint operations and modern combat systems [1][6] AI Applications in Military - AI applications in the military encompass various areas, including command operations, equipment maintenance, autonomous drones, and logistics management [5][7] - The U.S. leads in military AI, with significant investments in AI companies and rapid decision-making enhancements within NATO [5][9] - China's military AI development involves numerous companies, including aerospace and navigation firms, contributing to a comprehensive upgrade of military capabilities [9] Emerging Technologies and Equipment - The 2025 military parade highlighted new technologies such as AI-enabled drones and ground robots, enhancing overall military effectiveness [8][9] - Specific advancements include lightweight automatic rifles and smart wearable devices for soldiers, improving operational efficiency [8][9] Long-term and Short-term Outlook - Long-term prospects for military informationization and intelligence construction in foreign trade are promising, potentially expanding the domestic military market [10] - Short-term recovery in foreign trade requires time, with the military sector showing thematic investment trends [11] New Production Forces and Trends - Key development areas include commercial aerospace, low-altitude economy, and deep-sea technology, which are prioritized in national development plans [12][14] - The deep-sea technology sector is crucial for national security and economic interests, with ongoing advancements in underwater research and resource development [13][14] Investment Recommendations - Focus on military AI industrialization, with attention to emerging themes in commercial aerospace and unmanned intelligence [16][17] - Key companies to watch include those involved in national defense and aerospace, as well as firms specializing in AI and information technology [16][17]

1. Report Industry Investment Rating No relevant content provided. 2. Core Views of the Report - The aerospace and defense industry is driven by multiple factors, including the 14th Five - Year Plan, the development of military intelligence, and the growth of military trade. It has long - term growth potential and short - term catalysts [3][8][11][17][32]. - The aerospace and aviation sectors are the two core areas to focus on, with increasing downstream demand in high - end fighter jets, aero - engines, and related supporting materials [40]. - The Guozheng Aerospace and Aviation Industry Index has strong industry theme attributes, high elasticity, and relatively stable fundamentals, making it a representative military - related index [3][68][83][88]. - The Aerospace and Aviation ETF Tianhong (159241) closely tracks the Guozheng Aerospace and Aviation Industry Index, with low management and custody fees, and shows good performance in terms of share growth and liquidity compared to comparable ETFs [3][94][96]. 3. Summary by Directory 3.1 Multiple Logics Driving the Rapid Development of the Industry and Grasping the Two Main Lines of Aerospace and Aviation 3.1.1 Multiple Logics Supporting the Military Fundamentals and the Industry's Long - term Growth - The 14th Five - Year Plan is in its critical period, promoting the transformation of "point - like orders" to "line - like orders", and factory performance is expected to be realized. The demand for improving quality and increasing quantity remains strong to achieve the goal of a powerful military by 2027 [8][10]. - The construction of military intelligence and unmanned systems at home and abroad is expanding the growth boundary of the military industry. Military AI is reshaping the battlefield rules, and military robots are becoming new combat forces [11][13][15]. - China's military trade net export has been increasing steadily, and there is still much room for market share growth. The military achievements during the 14th Five - Year Plan and improved diplomatic relations are conducive to the development of the military trade market [17][21][26]. 3.1.2 Short - term Catalysts Increasing Industry Attention - The "15th Five - Year Plan" is being formulated, which will promote the high - quality construction of the military industry and may increase the industry's valuation. The 80th anniversary of the victory of the Chinese People's War of Resistance against Japanese Aggression and the World Anti - Fascist War parade will be a short - term catalyst to boost the industry's attention [32][36]. 3.1.3 Focusing on the Two Core Main Lines of Aerospace and Aviation - **Aviation Equipment**: The downstream demand for high - end fighter jets and aero - engines is accelerating, and the market space is expanding. This includes aircraft manufacturers, aero - engine manufacturers, and high - end supporting materials suppliers. The future market space for military aero - engines in the next decade is estimated to be about 1.2 trillion yuan [40][52]. - **Space Equipment**: The demand for guidance equipment is increasing due to the growing importance of missiles in modern warfare. The satellite industry chain has a large market potential, with the downstream ground equipment and satellite services accounting for over 90% of the market value [59][64]. 3.2 Guozheng Aerospace and Aviation Industry Index: Focusing on Guozheng Aerospace and Aviation Industry Stocks with Strong Industry Theme Attributes and High Theme Elasticity 3.2.1 Index Compilation Method - The index is designed to reflect the stock price changes of aerospace and aviation - related listed companies in the Shanghai, Shenzhen, and Beijing stock exchanges. It selects large - market - value stocks in the Guozheng tertiary industry "Aerospace and Aviation". The sample space has certain requirements, and the selection method is based on free - floating market capitalization, with a semi - annual adjustment frequency [68][70]. 3.2.2 Index Weight and Market Value Distribution - As of July 1, 2025, the index has 50 constituent stocks, with relatively dispersed weights. It has a strong defense - military attribute, focusing on aviation equipment and military electronics. The average free - floating market capitalization is 130.75 billion yuan, and the average total market capitalization is 304.40 billion yuan [71][75]. 3.2.3 Index Industry/Theme Characteristics - The index has a high concentration in the defense - military industry, with 98.02% of the weight belonging to this industry, mainly in the aviation equipment and military electronics sectors. Compared with comparable indices, it has the highest concentration in the military industry and a more prominent industry theme [80][81]. 3.2.4 Fundamental Characteristics - The index shows a high and steadily increasing R & D investment ratio, reaching 4.53% by the end of 2024. It has strong growth attributes and relatively stable profitability compared to comparable indices. Its net profit stability is the strongest since 2022 [83][87]. 3.2.5 Index Investment Value Analysis - It is a representative military - related index with a similar long - term trend to comparable indices. It shows high elasticity during market rebound periods, outperforming comparable military indices in terms of returns during several rebounds [88][90]. 3.3 Aerospace and Aviation ETF Tianhong (159241) - The fund was established on May 21, 2025, and listed on May 29, 2025. Managed by Mr. Sha Chuan and Mr. Qi Shichao, it closely tracks the Guozheng Aerospace and Aviation Industry Index, aiming to minimize tracking deviation and error. It has a management fee of 0.50% and a custody fee of 0.10%. It has a relatively low discount rate and shows good performance in share growth and liquidity [94][95][96]. 3.4 Fund Manager and Fund Manager Information 3.4.1 Fund Manager Introduction - Tianhong Fund was established on November 8, 2004, and is a national public - offering fund management company. As of March 31, 2025, its total asset management scale is 124.3409 billion yuan, with 29 public - offering ETF products and a total ETF scale of 79.79 billion yuan [99]. 3.4.2 Fund Manager Introduction - Mr. Sha Chuan has 14 years of securities experience and manages 12 products with a total non - linked fund scale of 155.27 billion yuan. Mr. Qi Shichao has rich experience in Tianhong Fund and manages 17 products with a total non - linked fund scale of 203.69 billion yuan [100].