Market Performance - The ground equipment sector increased by 7.41% on August 6, with Jieqiang Equipment leading the gains [1] - The Shanghai Composite Index closed at 3633.99, up 0.45%, while the Shenzhen Component Index closed at 11177.78, up 0.64% [1] Individual Stock Performance - Jieqiang Equipment (300875) closed at 58.06, up 20.01% with a trading volume of 220,800 shares and a transaction value of 1.174 billion [1] - Beifang Changlong (301357) closed at 157.90, up 20.00% with a trading volume of 128,800 shares and a transaction value of 1.892 billion [1] - Changcheng Military Industry (601606) closed at 46.98, up 10.00% with a trading volume of 426,000 shares and a transaction value of 1.947 billion [1] - Neimeng Yiji (600967) closed at 23.66, up 10.00% with a trading volume of 1,792,000 shares and a transaction value of 4.101 billion [1] - Tianzou Equipment (300922) closed at 32.04, up 6.30% with a trading volume of 231,500 shares and a transaction value of 734 million [1] Capital Flow Analysis - The ground equipment sector saw a net inflow of 1.129 billion from main funds, while retail funds experienced a net outflow of 619 million [2][3] - Main funds showed significant net inflows in Neimeng Yiji (5.01 million) and Zhongbing Hongjian (2.58 million) [3] - Retail funds had notable outflows in Neimeng Yiji (-2.04 million) and Zhongbing Hongjian (-1.52 million) [3]

1. Report Industry Investment Rating No relevant content provided. 2. Core Views of the Report - The aerospace industry maintains high prosperity, with both military and civilian sectors advancing simultaneously. The defense and military industry remains highly prosperous, driven by domestic demand and international military trade. The aviation sector is steadily growing, propelled by both military and civil aviation. The aerospace sector combines growth elasticity and development certainty [1][5]. - The Guozheng Aerospace and Aviation Industry Index is a strong defense - military index that emphasizes aviation and aerospace, featuring stable R & D, stable revenue, and high industry elasticity. It has a pure military - industrial attribute, and its R & D investment is steadily increasing. In the long - term, its performance is similar to that of the CSI Military Industry Index, but it shows prominent short - term elasticity [1]. - The Huanguo Guozheng Aerospace and Aviation Industry ETF (159267) closely tracks the underlying index, aiming to minimize tracking deviation and tracking error. The fund manager and the fund management company have rich experience and strong strength [1]. 3. Summary by Directory 3.1 Aerospace Maintains High Prosperity, with Both Military and Civil Sectors Advancing Simultaneously 3.1.1 Defense and Military Industry Maintains High Prosperity, Driven by Domestic Demand and International Military Trade - China's defense budget and the US defense expenditure have been growing steadily in recent years, maintaining a high level of military prosperity. From 2023 - 2025, China's defense budget expenditure had a year - on - year growth rate of 7.2%. The US also increased its defense construction and equipment investment in recent years [5]. - Domestically, the construction of military mechanization and informatization during the 14th Five - Year Plan is ongoing, and the development of intelligence and unmanned systems is expected to become a new driving force for military construction during the 15th Five - Year Plan. Currently, domestic and foreign defense construction in intelligent and unmanned systems is progressing orderly [10]. - Internationally, the unstable situation in the Middle East and high per - capita military spending have maintained the activity of the military trade market. China's military strength has been continuously increasing, and its military trade net export volume has been rising steadily. In 2024, the net export volume reached 1.059 billion TIV, and China's military trade export accounted for about 4% of the global total military market [14][18]. 3.1.2 Both Military and Civil Aviation Drive the Steady Growth of the Aviation Sector - **Military Aviation**: The 15th Five - Year Plan is expected to inject new growth momentum. The demand from the air force is rising steadily, and that from the navy is growing rapidly. There is a large space for model replacement, and foreign trade exports are expected to become a new performance growth point. The market space for military aviation engines in the next ten years is expected to reach 1.212 trillion yuan [27][37]. - **Civil Aviation**: - **Domestic Large - scale Aircraft**: The large - scale aircraft industry has great strategic significance and potential economic value. It has a significant economic "multiplier effect." The Commercial Aircraft Corporation of China (COMAC) is accelerating the production of large - scale aircraft, and the C919 is expected to reach an annual production capacity of 150 aircraft within five years [40][43]. - **Low - altitude Economy**: It is a new format in the aviation industry, and its scale is expected to exceed one trillion yuan in 2026. With policy support, it is expected to become a new driving force for new - quality productivity [46]. 3.1.3 The Aerospace Sector Combines Growth Elasticity and Development Certainty - **Guidance Equipment**: It has great growth elasticity. The importance of advanced missiles and consumable shells is increasing, and the demand for related core materials, chips, components, etc., is accelerating. The demand for real - ammunition training and global local conflicts has increased the demand for related ammunition [55][59]. - **Commercial Aerospace**: The satellite industry chain shows a pyramid structure, with great potential in the blue - ocean market worth hundreds of billions. The market concentration of rocket launches is expected to increase, and the operation end has a large value share and significant head - concentration effect [61][68]. 3.2 Guozheng Aerospace and Aviation Industry Index: A Strong Defense - Military Index that Emphasizes Aviation and Aerospace, Combining Stable R & D, Stable Revenue, and High Industry Elasticity 3.2.1 Index Compilation Method The Guozheng Aerospace Index was established to reflect the stock price changes of aerospace - related listed companies on the Shanghai, Shenzhen, and Beijing Stock Exchanges. It selects large - market - capitalization stocks in the "Aerospace" tertiary industry of Guozheng [72]. 3.2.2 Index Weight and Market - Capitalization Distribution As of July 1, 2025, the index had 50 constituent stocks. The index weights are relatively dispersed, with the top ten weighted stocks accounting for 49.42% and the top twenty accounting for 70.82%. The index focuses on the military - aviation equipment industry and has a pure military - industrial attribute [75]. 3.2.3 Index Industry/Theme Characteristics The constituent stocks of the Guozheng Aerospace Index are highly concentrated in the defense and military industry, with 48 stocks accounting for 98.20% of the weight. Compared with comparable indices, it has the highest concentration in the military industry, and its industry and theme attributes are the most prominent [83]. 3.2.4 Fundamental Characteristics The R & D investment of the Guozheng Aerospace Index has been rising steadily. By the end of 2024, its R & D investment ratio had risen to 4.53%. Compared with comparable indices, it has the strongest profit stability since 2022. In 2024, its net profit decreased by only about 5% compared with the end of 2021 [88][91]. 3.2.5 Index Investment Value Analysis In the long - term, the performance of the Guozheng Aerospace Index is similar to that of the CSI Military Industry Index. In the short - term, it shows high elasticity. During the market rebound period, its return performance is better than that of comparable military - industry indices [93][95]. 3.3 Huanguo Guozheng Aerospace and Aviation Industry ETF (159267) The fund was established on July 21, 2025, and officially listed on August 1, 2025. The current fund manager is Liu Xuanzi. It closely tracks the underlying index, aiming to minimize tracking deviation and tracking error, with a management fee rate of 0.50% and a custody fee rate of 0.10% [1][99]. 3.4 Fund Manager and Fund Management Company Information 3.4.1 Fund Management Company Introduction Hua'an Fund Management Co., Ltd. was established in 1998 and is one of the first five fund management companies approved by the China Securities Regulatory Commission. As of December 31, 2024, the company's public - offering fund scale exceeded 650 billion yuan, and its non - monetary public - offering asset management scale exceeded 400 billion yuan. It manages 275 public - offering funds and has a total of 42 public - offering ETF products, with a cumulative scale of 135.071 billion yuan [100]. 3.4.2 Fund Manager Introduction Liu Xuanzi has a master's degree and 11 years of experience in the fund industry. She currently manages 18 passive index funds with a total scale of 5.009 billion yuan [102].

Core Viewpoint - The article highlights the significant rise of the military industry in the A-share market, particularly focusing on the strong performance of Changcheng Military Industry, which has seen its stock price surge due to multiple driving factors and a changing valuation logic in the military sector [6][10][21]. Group 1: Market Performance - The A-share market saw all three major indices slightly rise, with a total trading volume of 16,158 billion, and over 3,900 stocks increasing in value, indicating improved trading sentiment [2]. - The military equipment restructuring concept has gained momentum, with an index increase of 6.12% and a net inflow of 6.655 billion in capital, making it the strongest sector in the market [3]. Group 2: Company Background - Changcheng Military Industry was established in 2000 and is a key player in the domestic military resource integration, focusing on both military and civilian products [8]. - The company has a comprehensive product range, including mortars and individual rockets, and has recently benefited from a change in actual control to the China Ordnance Equipment Group [8][10]. Group 3: Financial Performance - Despite being a leader in a niche military sector, Changcheng Military Industry has historically shown poor financial performance, with revenues only in the range of several hundred million and continuous losses over multiple quarters [8][9]. - However, 2025 has seen a turnaround, with significant orders and a 37% increase in pre-receivable accounts, indicating potential for explosive growth in performance [10][11]. Group 4: Industry Trends - The military sector is experiencing a transformation due to increased global military budgets and geopolitical tensions, leading to heightened market interest in military stocks [10][17]. - The military industry is now characterized by a more sustainable growth model, with a projected net profit growth of 35% for 2025, contrasting with previous cycles of high valuations and underperformance [17][18]. Group 5: Subsector Growth - Various subsectors within the military industry, such as military electronics and aviation equipment, are witnessing significant growth, driven by increased demand and technological advancements [18][19]. - The global military drone market is expected to grow from $16.5 billion in 2022 to $34.3 billion by 2025, with a compound annual growth rate of 27.6%, indicating robust demand for unmanned systems [19][20]. Group 6: Investment Opportunities - The changing valuation logic in the military sector presents opportunities for investors, as companies like Changcheng Military Industry may replicate the growth trajectory of successful peers [21][22]. - The current environment is marked by a potential for significant stock price increases, but investors are advised to approach with caution due to the risk of speculative bubbles [22].

Market Overview - On August 1, the market experienced fluctuations with the three major indices slightly declining, and the total trading volume in the Shanghai and Shenzhen markets was 1.60 trillion CNY, a decrease of 337.7 billion CNY compared to the previous trading day[2] - The Shanghai Composite Index saw a net outflow of 2.381 billion CNY, while the Shenzhen Composite Index had a net inflow of 2.675 billion CNY[4] Sector Performance - The sectors with the highest net inflows were photovoltaic equipment, traditional Chinese medicine, and logistics, while the sectors with the highest net outflows included semiconductors, components, and ground weaponry[4] - The pharmaceutical and education sectors showed resistance but did not exhibit complete trends, indicating potential areas for continued observation[1] Economic Policy Insights - The National Development and Reform Commission (NDRC) announced that the 800 billion CNY list of "two heavy" construction projects has been fully allocated, and 735 billion CNY of central budget investment has been largely distributed[5] - The NDRC plans to implement a "AI+" initiative to enhance the application of artificial intelligence, indicating a focus on technological advancement[5] Long-term Investment Directions - Long-term investment opportunities are expected to be centered around industries supported by national policies, particularly in new energy and computing power sectors[1] - The NDRC is also working on establishing a list of national-level zero-carbon parks, which may present future investment opportunities[5] Fund Dynamics - The second batch of floating fee funds is set to launch, with three products scheduled for issuance on August 4, including a medical innovation fund with a fundraising cap of 3 billion CNY[12] - The number of private equity securities investment funds from insurance companies has increased to six, indicating a growing trend of long-term capital inflow into the market[13]

Industry Overview - The defense and military industry index increased by 1.28% in the week from July 19 to July 26, ranking 24th out of 31 in the Shenwan primary industry [1][7] - Over the past month, the index rose by 7.26%, ranking 13th out of 31 [1][10] - In the past year, the index has increased by 39.44%, ranking 12th out of 31 [1][12] Valuation Metrics - As of July 26, the PE-TTM for the defense and military industry is 84.92, which is at the 77.27 percentile of the past ten years [1][15] - The PE-TTM for the aviation equipment sector is 76.50 (71.02 percentile), for aerospace equipment is 146.02 (95.80 percentile), for naval equipment is 53.82 (3.33 percentile), for military electronics is 103.87 (96.33 percentile), and for ground armaments is 189.72 (95.27 percentile) [1][13][15] Stock Performance - The top-performing stocks in the defense and military sector for the week include: - Boyun New Material (25.16%) - Feilihua (20.79%) - Xinyu Guoke (10.14%) - Hongdu Aviation (9.69%) - Optoelectronic Co. (9.37%) [1][18] - The worst-performing stocks include: - Tianqin Equipment (-3.40%) - AVIC Shenyang Aircraft (-3.56%) - Taihao Technology (-3.89%) - Hailanxin (-3.98%) - Guorui Technology (-7.61%) [1][18] Key Industry Data Tracking - Current price of sponge titanium is 45 RMB/kg, unchanged from a week ago but down 8.16% year-on-year [1][31] - LME nickel spot price is 15,245 USD/ton, up 2.32% week-on-week and 2.97% month-on-month, but down 1.45% year-on-year [1][31] - Domestic acrylonitrile price is 8,050 RMB/ton, unchanged from a week ago, down 1.83% month-on-month, and down 11.54% year-on-year [1][33] Industry News - The Yanxin Satellite has a 1.336 billion RMB tender for launch services, with a total of 7 launches planned for 94 satellites [1][48] - The National Space Administration issued a notice to strengthen quality supervision of commercial space projects [1][48] - Conflicts occurred between Cambodia and Thailand along the border [1][48] Investment Recommendations - The report suggests focusing on military trade, commercial aerospace, and low-altitude economy as key investment themes and targets due to escalating geopolitical conflicts [1][50]

Investment Rating - The report assigns an "Accumulate" rating to the company, Inner Mongolia First Machinery Group Co., Ltd. (600967.SH) [5] Core Views - The company is the only main battle tank research and manufacturing base in China, driven by both domestic demand and military trade. It has established a production pattern that integrates various types of armored vehicles and artillery, making it a key player in China's defense industry [1][5] - The company's revenue and profit are under short-term pressure, but there is an upward turning point in Q1 2025, with revenue of 2.731 billion yuan, a year-on-year increase of 19.6%, and a net profit of 186 million yuan, a year-on-year increase of 11.03% [1][31] - The company is actively expanding into the military drone sector, leveraging its technological advantages in armored vehicles, which presents significant growth potential [1][11] Summary by Sections Domestic Demand - The new generation of equipment has a continuous replacement demand, and the company is expanding into the military drone field. The ZTZ-99 main battle tank has been in service for over 20 years, and the development of the fourth generation of tanks is underway [1][11] - The company expects domestic revenue to grow by 12% to 114.1 billion yuan from 2025 to 2027, with a stable increase in gross profit margin [11][39] Foreign Trade - The demand for foreign trade is expected to drive a small peak in tank exports. The company has seen significant growth in military trade, with expected sales of 4.517 billion yuan in 2025, a 64% increase from 2024 [2][11] - The VT-4 and VT-5 tanks are gaining international recognition, with orders from countries like Pakistan, Thailand, and Nigeria, indicating a strong potential for military trade orders [2][67] Profit Forecast - The company is projected to achieve revenues of 11.5 billion yuan, 13.1 billion yuan, and 14.8 billion yuan from 2025 to 2027, with corresponding net profits of 750 million yuan, 950 million yuan, and 1.2 billion yuan, reflecting growth rates of 50%, 27%, and 27% respectively [2][14]

Investment Rating - The investment rating for the company is "Buy" (maintained) [6] Core Insights - The company successfully completed a private placement of shares, raising a total of 1.02 billion yuan by issuing 7.397 million shares at a price of 13.8 yuan per share, which will facilitate capacity expansion and ensure future performance release [1] - The company is positioned at the core of the special robotics sector, providing integrated optical reconnaissance solutions for unmanned platforms, with products expected to be showcased at the 2024 Zhuhai Airshow [2] - The defense sector is experiencing rapid information technology advancements, with increasing demand for precision-guided munitions, which the company is well-equipped to meet due to its strong technological capabilities in laser guidance systems [3] - The optical materials and components segment is witnessing a shift of the industry towards China, with the company's subsidiary holding a 30% market share in the domestic high-quality optical glass market [4] Financial Summary - Revenue projections for the company are expected to reach 2.3168 billion yuan in 2025, 3.0118 billion yuan in 2026, and 3.7918 billion yuan in 2027, with a compound annual growth rate (CAGR) of 28% from 2025 to 2027 [5] - The net profit attributable to the parent company is forecasted to be 0.86 billion yuan in 2025, 1.129 billion yuan in 2026, and 1.448 billion yuan in 2027, with a CAGR of 30% during the same period [5] - The company is projected to have a revenue of 1.297 billion yuan in 2024, reflecting a 41.1% decrease, followed by a significant recovery in 2025 with a growth of 78.6% [6]

Market Overview - On July 18, the A-share market experienced an upward trend, with the Shanghai Composite Index rising by 0.5% to close at 3534.48 points, and the ChiNext Index increasing by 0.34%. Market sentiment improved, leading to a trading volume of 1.59 trillion yuan [1]. Defense and Military Industry Performance - The defense and military sector continued to show strong performance, with the popular defense and military ETF (512810) rising by 1.06%, marking its highest closing price since November 14, 2024. The ETF recorded a trading volume of 92.06 million yuan for the day [1]. - For the week of July 14-18, the defense and military ETF (512810) accumulated a gain of 2.45%, achieving a four-week consecutive increase, with a total weekly trading volume of 404 million yuan, significantly higher than the previous week [2]. Earnings Forecasts and Stock Performance - As of July, the defense and military sector was primarily in a phase of adjustment, influenced by mid-year earnings expectations. However, from July 17 onwards, the sector began to rebound as several companies released positive earnings forecasts, indicating a recovery in the sector's fundamentals [3]. - Among the 29 component stocks of the defense and military ETF that have released mid-year earnings forecasts, 23 are expected to report profits. Notably, 11 companies are projected to see their net profits double, with Aerospace Science and Technology showing a growth rate exceeding 23 times [3]. Notable Stock Movements - The defense and military ETF's component stocks saw 59 stocks rise and 21 decline, with several stocks reaching historical or recent highs. Notable performers included AVIC Shenyang Aircraft Company, which rose by 2.92%, and Yingliu Co., which surged by 3.44% [4]. Future Outlook - The outlook for the defense and military sector appears promising, with multiple catalysts expected to drive growth. Short-term improvements in Q2 earnings are anticipated due to increased orders and a stabilization in military component orders. The sector is expected to gain further attention as the September 3 military parade approaches, potentially leading to structural investment opportunities [6]. - Long-term prospects are bolstered by geopolitical factors, such as the India-Pakistan conflict, which may enhance China's defense industry's profile and stimulate military trade. The upcoming centenary of the military in 2027 is also expected to sustain high demand for military equipment [6]. Investment Strategy - The defense and military ETF (512810) is highlighted as a strategic investment option, offering exposure to both traditional and emerging military capabilities. It includes a diverse range of sectors such as commercial aerospace, low-altitude economy, large aircraft, deep-sea technology, and military AI. The ETF is considered a low-risk investment vehicle with a lower entry threshold compared to individual stocks [7].

Group 1 - The defense and military industry experienced a significant surge, with ground equipment concepts collectively rising, and companies like Construction Industrial hitting the daily limit [1] - The popular defense and military ETF (512810) saw a strong performance, achieving consecutive gains over 5-day and 10-day moving averages, with increased capital inflow in the previous two days [1] Group 2 - During the mid-year reporting season, 29 component stocks of the defense and military ETF have released performance forecasts, with 23 stocks expected to report profits, accounting for nearly 80% [3] - Among the forecasted net profit growth, 11 stocks are expected to see a doubling of net profits, with Aerospace Science and Technology's net profit growth exceeding 23 times, and companies like Gaode Infrared and Nairui Radar also showing significant growth rates of over 9 times and 8 times respectively [3][4] - The shipbuilding sector's component stocks are generally exceeding expectations, with companies like China Shipbuilding, China Heavy Industry, China Power, and China Ship Defense all forecasting a doubling of their performance [3] Group 3 - The defense and military ETF (512810) is highlighted as an efficient investment tool, covering various themes such as commercial aerospace, deep-sea technology, military AI, low-altitude economy, and large aircraft, while also being a financing and interconnection target [5]

Market Overview - A-shares experienced a strong performance early in the week, with the Shanghai Composite Index surpassing 3400 points and reaching a new high for the year, followed by a slight adjustment later in the week [1] - Weekly trading volume increased significantly to 7.43 trillion yuan, the highest in two and a half months [1] - Margin trading saw a net buy of over 25.6 billion yuan, the largest weekly net purchase in four months [1] Sector Performance - The computer and non-bank financial sectors attracted over 4 billion yuan in net buying, while the electronics sector saw over 3.5 billion yuan and the power equipment sector over 2.6 billion yuan in net buying [1] - The real estate and construction decoration sectors experienced net selling of over 200 million yuan, with textiles, coal, and oil and petrochemicals also facing slight net selling [1] Capital Inflows - The computer sector received over 48.1 billion yuan in net inflows from major funds, with electronics, non-bank financials, and power equipment sectors each attracting over 30 billion yuan [1] - The defense and military industry saw net inflows exceeding 25.1 billion yuan, while communication, machinery, automotive, and basic chemicals also received over 10 billion yuan each [1] - Banking, oil and petrochemicals, and public utilities sectors experienced net outflows exceeding 2 billion yuan, with food and beverage and beauty care sectors also seeing slight outflows [1] Military and Metal Sectors - The military sector strengthened significantly following the approval of a restructuring plan, with the ground equipment index rising 20.81% and reaching an 8-year high [2] - Leading stocks in the military sector, such as Changcheng Military Industry, saw a cumulative increase of over 91% in the past eight trading days [2] - Metal sector stocks also performed well, with industrial metals, rare metals, and rare resources indices all achieving new highs [2] - Lithium carbonate futures surged by 6.24%, while copper, zinc, and other main contracts also saw five consecutive days of price increases [2] Future Outlook - Domestic policy is expected to gradually improve terminal demand, with metal demand elasticity set to increase [3] - Supply constraints for metals like copper and aluminum are anticipated to continue, leading to a tightening supply-demand situation [3] - Market sentiment indicators suggest potential for further index increases, but caution is advised regarding the brokerage sector's role in market movements [3]