Investment Rating - The report maintains a "Positive" investment rating for the defense and military industry [5] Core Viewpoints - The uncertainty in the Asia-Pacific situation is increasing, which may accelerate the equipment construction in China, focusing on new combat capabilities [2][12] - China's high-end aviation equipment showcased at the Dubai Airshow is expected to further expand the military trade market [12][15] - The Fujian aircraft carrier has conducted its first live training at sea, indicating a significant advancement in operational capabilities and technology [12][18] - The report emphasizes the importance of domestic demand for new combat capabilities and military trade as key growth areas [19] Summary by Sections Investment Suggestions and Targets - The report highlights various investment targets across different segments, including: - Engine and fuel chain: Companies like Xi'an Aero Engine (600893), Western Superconducting (688122), and others [19][20] - New quality and domains: Companies such as Aerospace Electronics (600879), Haige Communication (002465), and others [19][20] - Military electronics: Companies like Aerospace Electric (002025), Zhonghang Optical (002179), and others [19][20] - Military trade and main equipment: Companies such as AVIC Shenyang Aircraft (600760), AVIC Chengfei (302132), and others [19][20] Industry News and Market Performance - The report notes that the defense and military industry index has outperformed the broader market, with a decline of only -1.72% compared to the Shanghai Composite Index's -3.90% [22][25] - The report provides a detailed analysis of weekly market performance, indicating that the defense and military sector remains resilient amid broader market declines [22][25] Key Events and Developments - The report outlines significant recent events, including: - The U.S. government approved a new round of arms sales to Japan, which may heighten regional tensions and prompt China to expedite its military equipment development [12][9] - The successful live training of the Fujian aircraft carrier, showcasing advanced operational capabilities [12][18] - The participation of Chinese high-end military equipment in international exhibitions, enhancing China's presence in the global military trade market [12][15]

11月21日，中国工程院2025年院士增选结果正式揭晓，共有71人当选。 中国航空工业集团有限公司沈阳飞机设计研究所首席专家王永庆当选中国工程院院士。 王永庆 "中国要强大，人民生活要好，必须有强大的国防科技作为支撑。身为一名科技工作者，只有把个人理想与党和国家的需要、民族的前途命运紧密联 系在一起，取得的成就才能真正体现价值！"王永庆斩钉截铁地说道："所以，我们要更努力，让国家更硬气！" 有底牌，才有底气 ——发展武器装备，关键是要拥有自己的核心技术，长缨在手方能以武止戈 我国是一个拥有1.8万公里大陆海岸线、300多万平方公里管辖海域的海洋大国，建设海洋强国早已经被提升至国家发展的战略高度。航空母舰是中国 的百年梦想，而舰载机是航母建设工程中的重要装备。由于舰载机的设计工作涉及重大关键技术多，难度大，需要技术决策和跨行业协调的深度和广度前 所未有。这条布满荆棘的奋斗之路，并不被外界看好，甚至有很多西方人发出了"即便航母辽宁舰入列之后，中国的舰载机至少还会有5年左右的时间才能 在舰上使用"的断言。 王永庆和他的同事们一道发力，用实际行动打碎了这一妄言。面对着重重困难和外界的质疑，作为歼15常务副总师，王永庆 ...

Core Viewpoint - The 2025 Air Force Aviation Open Event and Changchun Aviation Exhibition in Jilin Province focuses on the theme "Chasing Dreams in Aerospace, Winning the Future," showcasing over a hundred aviation equipment developments by the Aviation Industry Corporation of China (AVIC) [1] Group 1: Event Overview - The event lasts for five days and includes aerial displays, ground static exhibitions, themed pavilions, and supporting activities [1] - The AVIC highlights the achievements in high-end, intelligent, and systematic development of aviation equipment, emphasizing its role in national strategy, defense construction, and social welfare [1] Group 2: AVIC Exhibition Design - The AVIC exhibition features a "concentric circle" design divided into three main areas: "Strengthening the Army," "Benefiting the Nation," and "Cultivating Spirit," reflecting the spirit of aviation patriotism and its support for national stability [2] - Key aircraft models such as the J-20S and J-35A are prominently displayed, accompanied by immersive video presentations from recent military parades [2] Group 3: "Strengthening the Army" Exhibition Area - This area showcases modern combat styles with sub-sections on air combat, strike support, reconnaissance, training efficiency, and onboard systems [3] - Main battle equipment like the J-20, J-10CE, and various missile systems are displayed to demonstrate AVIC's support for the Air Force's strategic goals [3] Group 4: "Benefiting the Nation" and "Cultivating Spirit" Exhibition Areas - The "Benefiting the Nation" area focuses on emergency rescue and low-altitude economy, featuring models like the AG600 and HH-100 unmanned transport systems [4] - The "Cultivating Spirit" area uses video content to highlight AVIC's commitment to innovation and cultural confidence in aviation under the leadership of the Party [4]

Core Viewpoint - The article highlights the display of various military aircraft and equipment by the China Aviation Industry Corporation during the 80th anniversary of the victory in the Chinese People's Anti-Japanese War and the World Anti-Fascist War, showcasing advancements in China's air combat capabilities. Group 1: Airborne Equipment - A total of 125 military aircraft, including the new models such as KJ-600, J-20A, J-20S, and J-35, were showcased for the first time in public [1] - The aerial formations included a variety of combat aircraft, transport planes, and early warning command aircraft, demonstrating a comprehensive representation of the military's air combat capabilities [1] Group 2: Specific Aircraft Types - The air command aircraft formation featured KJ-500A and J-16, along with KJ-600 and J-15T, highlighting the integration of advanced early warning systems [6] - The special aircraft formation included Y-9 anti-submarine patrol aircraft, electronic reconnaissance aircraft, and radar jamming aircraft, escorted by J-16 fighters [7] - The transport aircraft formation consisted of Y-20A and Y-20B, showcasing new domestic engines that enhance range, payload, and speed for strategic deployment [9] Group 3: Refueling and Fighter Aircraft - The aerial refueling formation demonstrated three Y-20A aircraft refueling J-16, J-20, and H-6N bombers, indicating advancements in aerial refueling capabilities [11] - The fighter aircraft formation included multiple new stealth fighters such as J-16D, J-20, J-35A, and J-20S, showcasing the evolution of China's carrier-based aircraft capabilities [12]

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **defense technology industry** in China, particularly during the **14th Five-Year Plan** period, with an emphasis on the military industry and its growth potential through 2025 [1][3][11]. Core Insights and Arguments - **Earnings Growth**: The core driver for the military sector's performance is the growth in **Earnings Per Share (EPS)**, with many leading companies achieving strong earnings, which has positively impacted stock prices [3][11]. - **Investment Opportunities**: Multiple thematic investment opportunities are available, including **low-altitude economy**, **commercial aerospace**, **deep-sea technology**, and **controlled nuclear fusion**, all of which are expected to have high growth potential in the medium to long term [1][8][22]. - **Military Trade Growth**: The military trade sector is identified as a significant growth area, with increasing support from state-owned enterprises and the potential for new generation equipment like the **Yun-20** and **J-35A** to enhance global competitiveness [7][20][21]. Important but Overlooked Content - **Domestic Demand**: China's military expenditure as a percentage of GDP is lower than that of Western countries, indicating a potential growth space of **20%-100%** [11]. - **Export Potential**: The current military trade market share for China is about **6%**, with a potential increase of over **60%** as compared to countries like France and Russia [12]. - **Aerospace Sector Dynamics**: The aerospace sector is highlighted as a key area, with a focus on new models, aftermarket demand, and military-to-civilian transitions. The **C919** aircraft is noted for its significant domestic replacement potential [5][14][16]. Future Trends and Projections - **Ammunition Sector**: The ammunition sector is experiencing a turning point, driven by global demand due to conflicts like the Russia-Ukraine war, leading to increased production and modernization efforts [4][19][17]. - **Investment Strategy**: A value-driven investment approach is recommended, focusing on high-quality blue-chip stocks that can deliver absolute and excess returns [13][10]. - **Emerging Technologies**: The call emphasizes the importance of emerging technologies in the defense sector, particularly in high-speed weapons and low-cost precision-guided munitions, which are expected to see increased demand [6][18]. Conclusion - The defense technology industry in China is poised for significant growth, driven by domestic and international demand, technological advancements, and strategic investments. The focus on EPS growth, military trade, and thematic investments presents a robust landscape for potential investors looking to capitalize on the evolving market dynamics.

Group 1 - The A-share market experienced slight adjustments on June 17, with the military industry sector showing significant movements, particularly the aerospace ETF (159227) which briefly turned positive, highlighting stocks like Zhongbing Hongjian, AVIC Shenyang Aircraft, Guobo Electronics, and Great Wall Military [1] - The 55th Paris Air Show, held from June 16 to 22, showcased China's aviation industry, featuring military aircraft such as the J-20, J-35A, J-10CE, Y-20, Z-20, and Z-10ME, indicating a strong ambition for transformation from a technology follower to a leader in the field, which may boost China's military trade [1] - The aerospace ETF (159227) closely tracks the National Aerospace Index, leading in scale among similar indices, with the defense and military industry accounting for 96.2% of the index, indicating a higher concentration in aerospace and defense equipment compared to other indices [1] Group 2 - According to AVIC Securities, themes such as low-altitude economy, commercial aerospace, deep-sea technology, large aircraft, and military intelligence have been highly active since the beginning of the year, suggesting that these new military domains will continue to deepen and evolve [2] - The military industry's fundamentals are expected to improve continuously, with active themes and performance boosts likely to drive the overall military market in the near future [2]

Core Viewpoint - The importance of maintaining control over aircraft design rights within China is emphasized, highlighting the historical significance and achievements of the Shenyang Aircraft Design Institute in the development of China's aviation industry [1][2]. Group 1: Historical Context - The Shenyang Aircraft Design Institute, established in 1956, is recognized as the first aircraft design institute in New China, marking the beginning of China's independent aircraft design era with the successful development of the J-1 trainer aircraft [1]. - The institute has a legacy of significant contributions to China's aviation history, including the development of various fighter jets and the establishment of a dedicated team of early aircraft designers [1]. Group 2: Key Achievements and Innovations - The J-8 fighter jet, which had its maiden flight in 1969, faced challenges during testing, leading to direct involvement from its chief designer, Gu Songfen, who personally observed flight tests to identify and resolve issues [2]. - The development of the J-15 carrier-based fighter jet was crucial for enhancing naval combat capabilities, with significant contributions from the late chief designer Luo Yang, who played a pivotal role in the project [2]. Group 3: Future Directions and Innovations - Recent initiatives include the establishment of an "Innovation Dream Factory" aimed at accelerating technology incubation and the transformation of research outcomes into practical applications for aircraft design [3]. - The new generation of engineers is taking over from their predecessors, utilizing strong knowledge foundations and innovative thinking to develop more advanced fighter jets for the country [3].

Core Viewpoint - The J-35A, China's second fifth-generation fighter jet, is set to make its international debut at the 2025 Paris Air Show, following its first appearance at the 2024 China Air Show, attracting global attention [1][2] Group 1: J-35A Features and Design Philosophy - The J-35 series is designed based on the "air-sea twin, multi-type" concept, allowing for a high number of aircraft to be produced and effectively utilized in systematic combat [1] - The design philosophy enables rapid development and iteration of the aircraft to meet combat needs [1] - The J-35A's debut at the China Air Show showcased its impressive performance, including a notable afterburner maneuver that captivated the audience [1] Group 2: Advantages of the J-35 Series - One of the core advantages of the "air-sea twin, multi-type" concept is the efficient use of resources, allowing for the reuse of research outcomes across different aircraft models, which significantly reduces development costs and time [2] - The anticipated future inventory of the J-35 series is expected to be substantial, which will lower maintenance costs and improve support efficiency [2] - The J-35 series is designed with enhanced combat capabilities, including superior stealth and strong collaborative combat abilities, likened to a "playmaker" in basketball, capable of coordinating other battlefield assets [2]

Industry Investment Rating - The industry investment rating is maintained at "Outperform the Market" [1] Core Viewpoints - In 2024, the 71 tracked military industry stocks achieved a total revenue of 566.27 billion yuan, a year-on-year growth of 0.76%, while the net profit attributable to shareholders decreased by 26.24% to 23.90 billion yuan, primarily due to a decline in overall gross margin [4][20] - The shipbuilding sector showed significant performance growth, with a revenue of 190.05 billion yuan, up 11.25%, and a net profit of 6.55 billion yuan, up 115.10% [4][37] - The total contract liabilities for the 71 military stocks reached 198.56 billion yuan at the end of 2024, a year-on-year increase of 5.91% [5][58] Summary by Sections 1. Military Industry Performance in 2024 - The overall performance of the military industry in 2024 showed a slowdown in revenue growth and profit pressure, with a total revenue of 566.27 billion yuan and a net profit of 23.90 billion yuan [20] - The overall gross margin for the 71 military stocks was 17.67%, down 1.80 percentage points year-on-year [23] 2. Q1 2025 Performance Analysis - In Q1 2025, the 71 military stocks reported a total revenue of 106.75 billion yuan, a decrease of 3.15% year-on-year, and a net profit of 5.61 billion yuan, down 4.40% [6][19] - The shipbuilding sector led the growth with a revenue of 40.99 billion yuan, up 9.81%, and a net profit of 2.05 billion yuan, up 232.11% [6][38] 3. Valuation and Index Performance - As of April 30, 2025, the military industry index had decreased by 4.21%, with a PE-TTM valuation of 96.49 times and a PB valuation of 3.27 times [7][49] - Historically, 74.88% of the time since January 1, 2014, the military sector's PE-TTM valuation has been below the current level [7] 4. Investment Recommendations - The report suggests focusing on two main investment themes: the ongoing demand for aerospace and the new technologies, products, and markets that may offer greater elasticity [10][11] - Key companies to watch include those in the aerospace sector such as AVIC Shenyang Aircraft Corporation and AVIC Xi'an Aircraft Industry Group, as well as companies involved in missile technology and new market opportunities [10][12] 5. Contract Liabilities and Future Outlook - The total contract liabilities for military stocks remained high, with significant increases in the shipbuilding sector [5][60] - The report anticipates a turning point in military orders as the "Centenary of the Army Building" goals progress, indicating potential growth in the military industry [8]

Industry Investment Rating - The industry investment rating is "Outperform the Market" and is maintained [1] Core Viewpoints - In 2024, the 71 tracked military industry stocks achieved a total revenue of 566.27 billion, a year-on-year growth of 0.76%, while the net profit attributable to shareholders was 23.90 billion, a decrease of 26.24% [4][20] - The decline in profit is primarily attributed to a decrease in overall gross margin, which was 17.67%, down by 1.80 percentage points year-on-year [4][23] - The shipbuilding sector showed significant performance growth, with a revenue of 190.05 billion, up 11.25%, and a net profit of 6.55 billion, up 115.10% [4][37] Summary by Sections 1. Military Industry Performance in 2024 - The overall performance of the military industry in 2024 showed a slowdown in revenue growth and profit pressure [20] - The total gross profit for the 71 military stocks was 100.08 billion, a decrease of 8.53% year-on-year [21] - The overall four expense rate for the 71 military stocks was 12.24%, a slight decrease of 0.07 percentage points [26] 2. Q1 2025 Performance Analysis - In Q1 2025, the 71 military stocks reported a total revenue of 106.75 billion, a year-on-year decrease of 3.15%, and a net profit of 5.61 billion, down 4.40% [6][19] - The shipbuilding sector led in growth, achieving a revenue of 40.99 billion, up 9.81%, and a net profit of 2.05 billion, up 232.11% [6][38] 3. Contract Liabilities - As of the end of 2024, the total contract liabilities for the 71 military stocks reached 198.56 billion, a year-on-year increase of 5.91% [5][58] - The shipbuilding sector saw a significant increase in contract liabilities, growing by 27.14% to 157.05 billion, while the aviation sector's liabilities decreased by 36.69% [5][60] 4. Investment Recommendations - The report suggests focusing on two main investment themes: the ongoing demand for aerospace and the potential of new technologies, products, and markets [10][11] - Key companies to watch include those in the aerospace supply chain and missile industry, such as AVIC Shenyang Aircraft Corporation and AVIC Heavy Machinery [10][11]