Investment Rating - The report maintains a "Buy" rating for the company, projecting significant profit growth over the next few years [5][44]. Core Insights - The company reported a revenue of 2.934 billion RMB for H1 2025, a slight increase of 0.4% year-on-year, but the net profit attributable to the parent company dropped by 77.4% to 86 million RMB [3][15][16]. - The decline in net profit is attributed to price reductions on certain products and extended acceptance periods affecting revenue recognition in the defense sector [4][16]. - Despite challenges, the company has seen rapid growth in orders within the defense, new energy, and data communication sectors, with a year-on-year increase of over 30% in new project orders [4][16]. Performance Summary - H1 2025 revenue: 2.934 billion RMB (YoY +0.4%), net profit: 86 million RMB (YoY -77.4%) [3][15]. - Q2 2025 revenue: 1.469 billion RMB (YoY +12.3%, QoQ +0.2%), net profit: 40 million RMB (YoY -74.9%, QoQ -13.8%) [3][15]. - The company’s gross margin for H1 2025 was 31.9%, down 15.6 percentage points, while the net profit margin was 3.0%, down 10.2 percentage points [4][21]. Business Analysis - The company’s connector business generated revenue of 2.065 billion RMB, up 9.96%, while the motor segment saw a revenue decline of 12.47% to 660 million RMB [4]. - The company has a robust order backlog, with contract liabilities increasing by 25.45% to 161 million RMB and inventory rising by 22.64% to 2.171 billion RMB [4][34]. - Capital expenditures for Q2 2025 reached 116 million RMB, a significant increase of 94.96% from the previous quarter, indicating ongoing capacity expansion [4][28]. Profit Forecast and Valuation - The company is expected to achieve net profits of 710 million RMB, 900 million RMB, and 1.12 billion RMB for the years 2025, 2026, and 2027, respectively, reflecting growth rates of 105.4%, 26.8%, and 23.4% [5][44]. - The projected price-to-earnings (P/E) ratios for 2025, 2026, and 2027 are 33, 26, and 21 times, respectively [5][44].

Core Viewpoint - Aerospace Electric reported a slight revenue increase but a significant decline in net profit for the first half of 2025, indicating a situation of "increased revenue but decreased profit" [1][2]. Financial Performance - The company achieved revenue of approximately 2.935 billion yuan, a year-on-year increase of 0.47% [1]. - Net profit attributable to shareholders was approximately 86.6952 million yuan, down 77.49% year-on-year [1]. - The non-recurring net profit was approximately 72.8174 million yuan, down 79.69% year-on-year [1]. - Operating costs increased by 28.6% to approximately 1.998 billion yuan, primarily due to rising prices of precious metals and changes in product pricing and structure [1][2]. Product Line Performance - The company experienced a "one rise and three declines" scenario across its product lines [2]. - Revenue from "connectors and integrated interconnection products," which account for over 70% of total revenue, was 2.065 billion yuan, up 9.96% year-on-year, marking it as the only growing segment [2]. - Revenue from "motor and control components" decreased by 12.47% to 660 million yuan [2]. - Revenue from "relays" and "optical communication devices" fell significantly, down 27.68% and 26.5% respectively [2]. Operational Highlights - The company reported breakthroughs in several key technologies and secured batch orders for three major new projects, with orders in strategic emerging industries increasing by over 30% year-on-year [3]. - The cash flow from operating activities improved, with a year-on-year increase of 46.11% to approximately -312 million yuan, attributed to an increase in the maturity of commercial acceptance bills [3]. - Several shareholders, including E Fund Defense Industry Mixed Securities Investment Fund, increased their holdings in the company during the second quarter [3].

Investment Rating - The report maintains an "Accumulate" rating for the defense and military industry, indicating a positive outlook for the sector in the next six months [1]. Core Insights - The upcoming military parade on September 3 is expected to catalyze the upgrade cycle of military equipment, highlighting the importance of new technologies such as unmanned systems and hypersonic weapons, which represent a revolution in warfare [5]. - The integration of military assets has evolved from pilot projects to a national strategic initiative aimed at addressing structural issues within military groups, enhancing resource allocation efficiency and innovation [5]. - China's military trade expansion is seen as a historic opportunity to reshape the global defense landscape, with Chinese equipment gaining competitiveness due to a complete industrial system and a shift towards a service-oriented business model [5]. - The report suggests focusing on ten key investment opportunities within the military sector, including companies involved in military aircraft, engines, ships, missiles, commercial aerospace, unmanned equipment, underwater security, military trade, large aircraft, and low-altitude economy [5]. Summary by Sections Industry Trends - The defense and military industry is experiencing a significant transformation driven by technological advancements and strategic asset integration [5]. Investment Opportunities - Key companies to watch include: 1. Military Aircraft: AVIC Shenyang Aircraft Corporation, AVIC Xi'an Aircraft Industry Group 2. Engine Manufacturing: Aero Engine Corporation of China 3. Shipbuilding: China Shipbuilding Industry Corporation 4. Missiles: North Navigation and Philihua 5. Commercial Aerospace: Aerospace Electronics, China Satellite 6. Unmanned Equipment: Aerospace Rainbow 7. Underwater Security: China Marine Defense 8. Military Trade: Zhongyun Drone, Guorui Technology 9. Large Aircraft: AVIC Gaoke, AVIC Aircraft 10. Low-altitude Economy: Zhongke Xingtou, Lais Information [5].