Core Viewpoint - The military industry sector is experiencing a pullback, with the military ETF (512660) declining over 1.2%. However, there is a strong emphasis on the trend of building a robust aerospace power in China, particularly in the next decade, which is deemed crucial for the country's aerospace development [1]. Industry Summary - The next ten years are identified as a "critical decade" for accelerating the construction of a strong aerospace power in China, with the "14th Five-Year Plan" being a pivotal period. The government has integrated commercial aerospace into the overall national aerospace development framework [1]. - The year 2026 is anticipated to be a significant milestone, referred to as the "financing year" for rockets, marking the beginning of a golden era for the rocket industry. Core enterprises are expected to go public and raise funds, which will rapidly drive the supply chain into a phase of capacity expansion [1]. - The SpaceX supply chain remains significant, with its plan for millions of satellites, high-frequency Starship launches, and the concept of space computing forming a closed loop. Investment focus should remain on the core of the industry, which is the accelerated pace of development and rapid performance realization, both pointing towards the domestic rocket industry chain and the SpaceX supply chain [1]. ETF and Index Summary - The military ETF (512660) tracks the CSI Military Industry Index (399967), which selects listed companies from the Chinese A-share market involved in aviation, aerospace, shipbuilding, weaponry, and military electronics. This index reflects the overall performance of listed companies in the military industry [1].

Investment Rating - The industry rating is "Outperform the Market" indicating that the overall return of the industry is expected to exceed the market benchmark index by more than 5% in the next 6 months [61]. Core Insights - The report emphasizes that 2026 will be a pivotal year for China's rocket financing, marking the beginning of a golden era for the rocket industry, with core companies expected to go public and drive supply chain capacity expansion [40][41]. - The focus should remain on the domestic rocket industry and the SpaceX supply chain, as both are expected to accelerate in terms of industry speed and performance realization [40][41]. - The report highlights significant developments in the SpaceX supply chain, including plans for deploying 1 million satellites and conducting 10,000 Starship launches annually, which will enhance space computing capabilities [42][43]. Summary by Sections Industry Performance Review - During the week of January 26-30, the Shenwan Military Industry Index (801740) decreased by 7.69%, while the CSI 300 Index increased by 0.08%, resulting in an underperformance of 7.77 percentage points [11][16]. - Since the beginning of 2026, the Shenwan Military Industry Index has risen by 4.09%, outperforming the CSI 300 Index, which increased by 1.65% [18][19]. Key Investment Opportunities - Recommended companies in the domestic rocket industry include: Feiwo Technology, Western Materials, Aerospace Power, Haoshi Electromechanical, and Guanglian Aviation [41][46]. - For the SpaceX supply chain, suggested companies are: Lens Technology, Yujing Co., and Maiwei Co. [42][46]. Financial and Valuation Insights - As of January 30, the current TTM price-to-earnings ratio for the Shenwan Military Industry Index is 82.54, with a percentile rank of 98.82% [45][44]. - The report notes a recovery in passive fund inflows, with net inflows of 186 million yuan into military ETFs during the week, indicating improved market conditions [29][43].

Group 1 - The military industry ETF (512660) rose over 1.4% on January 27, with a net inflow of nearly 100 million yuan, indicating a positive outlook for the industry fundamentals [1] - Huafu Securities highlights the investment focus on the SpaceX supply chain and the domestic rocket industry chain, with SpaceX aiming to achieve reuse of Starship this year and the V3 satellite scheduled for 2027 [1] - The domestic rocket industry is experiencing accelerated development and capital support, which will enhance its progress and lead to a significant increase in the number of large-scale rockets [1] Group 2 - The commercial space industry trend is emerging, with space photovoltaics potentially becoming the next growth area [1] - The military industry is expected to see a strong demand recovery by 2026, which supports a positive outlook for the industry's fundamentals [1] - The military ETF (512660) tracks the CSI Military Industry Index (399967), which selects listed companies related to the military industry from the Shanghai and Shenzhen markets, focusing on key areas such as aviation, aerospace, and military electronics [1]

Group 1 - The military industry ETF (512660) rose over 2% on January 19, driven by strong expectations for demand recovery in the military sector by 2026 [1] - Investment focus should gradually shift towards the core of the industry, specifically the SpaceX supply chain and domestic rocket industry, which are expected to be the fastest-growing and most inflation-resistant sectors [1] - The SpaceX supply chain is progressing rapidly, with the Starship and V3 satellites expected to achieve commercial deployment by 2027, leading to a significant revenue realization period from 2027 to 2030 [1] Group 2 - China's rocket industry is accelerating its development, with recent failures in two launch missions highlighting the necessity of rapid advancement [1] - The China Aerospace Science and Technology Corporation emphasized the need to break through reusable rocket technology and strategically plan for future industries such as space intelligence [1] - Ground terminals are also noteworthy, as they are expected to have high revenue realization confidence [1]