Investment Rating - The report indicates a recovery in the military industry, particularly in missile and military electronics sectors, suggesting a positive investment outlook for the industry [1][3]. Core Insights - The military industry is actively preparing for production in the first half of 2025, with revenue recovery observed in Q2. The electronic information sector is experiencing alleviated pricing pressures, while the aviation sector is expected to accelerate deliveries in the second half of the year [3][4][14]. - The overall revenue for the military industry in the first half of 2025 was 227.8 billion, a decrease of 6.7% year-on-year, but a recovery of 3.3% in Q2 compared to the previous quarter [6][7]. - The net profit attributable to shareholders for the first half of 2025 was 14.3 billion, down 28.0% year-on-year, but showing a significant recovery of 84.5% in Q2 compared to Q1 [6][7]. Summary by Sections Overall Industry Performance - The military industry is seeing a significant increase in contract liabilities compared to the beginning of the year, indicating a recovery in the upstream revenue sector in Q2 2025 [11][27]. - The first half of 2025 saw a gross margin of 22.1%, a slight decrease of 0.2 percentage points year-on-year, while the net margin was 6.3%, down 1.9 percentage points year-on-year [6][19]. Segment Performance - In the electronic information sector, revenue reached 38.2 billion, with an 8.7% year-on-year increase, while net profit was 2.93 billion, down 2.1% year-on-year [16][19]. - The aviation sector reported revenue of 146.9 billion, a decrease of 12.9% year-on-year, with net profit down 33.4% [16][19]. - The weaponry sector showed a revenue increase of 26.0% year-on-year, with net profit down 6.4% [16][19]. Industry Chain Insights - The downstream sector's contract liabilities increased significantly, reflecting a recovery in the upstream revenue sector in Q2 2025 [27][34]. - The gross margin for the upstream sector was 34.9%, down 2.9 percentage points year-on-year, while the net margin was 12.8%, down 3.9 percentage points [29][30].

Investment Rating - The industry investment rating is "Recommended (Maintain)" [3] Core Viewpoints - The report continues to be bullish on the aerospace precision-guided industry chain, indicating that the demand inflection point is approaching by the end of the 14th Five-Year Plan [4][5] - The defense and military industry index increased by 2.20% from February 10 to February 21, 2025, ranking 15th among 30 primary industry indices, underperforming the Shanghai Composite Index by 0.08 percentage points and the ChiNext Index by 2.73 percentage points [4][11] Summary by Sections 1. Investment Insights - As of February 21, 2025, among 219 military industry stocks, 144 have released their 2024 performance forecasts or reports. The median change in net profit forecasts shows 18 stocks with increases over 100%, 12 stocks with increases between 50% and 100%, and 43 stocks with declines over 100% [5][11] - The report highlights that 87 stocks are expected to see reduced performance, with 49 due to order or delivery issues, 10 due to impairment provisions, and 15 due to pricing and tax policy changes [5][11] 2. Market Performance - The defense and military industry index rose by 1.66% in the last five trading days (February 17 to February 21, 2025), while the Shanghai Composite Index rose by 0.97% and the ChiNext Index rose by 2.99% [17] - Year-to-date, the defense and military industry index has increased by 0.17%, underperforming the Shanghai Composite Index by 0.65 percentage points and the ChiNext Index by 6.36 percentage points [17] 3. Major Company Profit Forecasts and Valuations - The report provides profit forecasts for major companies, indicating that the expected revenue for 中航沈飞 (AVIC Shenyang Aircraft Corporation) in 2025 is 494.2 billion yuan, with a net profit of 37.7 billion yuan [28] - 中航西飞 (AVIC Xi'an Aircraft Industry Group) is projected to have a revenue of 510.5 billion yuan and a net profit of 10.3 billion yuan in 2025 [28] 4. Financing Balance - The current financing balance of the military industry accounts for 3.55% of the industry’s circulating market value, which is 1.17 percentage points higher than the overall A-share market [25][26] - As of February 21, 2025, the financing balance in the military sector has increased to 946.78 billion yuan, with 181 stocks involved [25][26]