Investment Rating - The industry investment rating is "Outperform" [2] Core Insights - As of July 20, 2025, among the 120 tracked defense industry listed companies, 37 have disclosed their H1 2025 earnings forecasts, with significant growth in the shipbuilding and defense information sectors [5][12] - The defense information sector shows high growth potential, with companies like Gaode Infrared and Chengchang Technology forecasting net profit growth rates of 846% and 335% respectively [6][12] - The shipbuilding sector also demonstrates strong performance, with companies such as China Shipbuilding and China Heavy Industry predicting net profit growth rates of 109% and 105% respectively [6][12] - The report suggests that the defense industry is expected to see an inflection point in orders, driven by new technologies and products aimed at enhancing equipment performance and reducing costs [14] Summary by Sections Industry Overview - The closing index for the defense industry is at 1669.63, with a 52-week high of 1712.48 and a low of 1113.62 [2] Performance Analysis - The defense sector index has outperformed the broader market, with a 2.58% increase in the China Securities Defense Index and a 2.26% increase in the Shenwan Defense Index [15] - The top-performing stocks in the defense sector this week include Yingliu Co. (+20.37%) and Feiliwa (+15.98%) [18] Earnings Forecasts - Among the 37 companies that disclosed earnings forecasts, 14 expect positive growth, while 12 anticipate losses [12] - Notable companies with high growth forecasts include Nairui Radar, Gaode Infrared, and China Heavy Industry, all projecting substantial increases in net profits [6][12] Investment Recommendations - The report recommends focusing on two main investment themes: aerospace and new technologies/products with greater elasticity [14] - Suggested companies for investment include Feiliwa, Gaode Infrared, and China Shipbuilding among others [14] Valuation Metrics - As of July 18, 2025, the defense sector's PE-TTM valuation stands at 117.29, with 83.01% of historical data indicating lower valuations [20][22]

Group 1 - The company forecasts a revenue of approximately 154.89 million yuan for the first half of 2025, representing an increase of about 82.12 million yuan or 113% compared to the same period last year [3] - The estimated net profit attributable to the parent company for the first half of 2025 is around 56.55 million yuan, which is an increase of approximately 50.66 million yuan or 860% year-on-year [3] - The net profit attributable to the parent company after deducting non-recurring gains and losses is expected to be about 53.50 million yuan, reflecting an increase of around 43.93 million yuan or 459% compared to the previous year [3] Group 2 - In the same period last year, the company reported a revenue of 72.78 million yuan and a net profit of 5.89 million yuan attributable to the parent company [5] - The company attributes the significant growth in revenue and profit to its product technology and brand advantages, as well as a substantial increase in new contracts for hydrological radar [6] - The company has experienced accelerated confirmation of existing orders, contributing to its rapid revenue growth and improved profitability [6]

Core Viewpoint - Narui Radar (688522.SH) expects a significant increase in net profit for the first half of 2025, projecting approximately 56.55 million yuan, representing a year-on-year growth of 860% [1] Financial Performance - The company anticipates a revenue increase of 113% year-on-year during the reporting period [1] - The substantial growth in net profit and revenue is attributed to the company's product technology and brand advantages [1] Market Position - Narui Radar has gained recognition from clients across various sectors, leading to a notable increase in new contracts for hydrological measurement and rain radar [1] - The acceleration in confirming existing orders has contributed to the company's improved financial performance [1]

Core Viewpoint - The article discusses the proactive measures taken by Sichuan province to manage flood risks during the main flood season, emphasizing the use of advanced technology and scientific water management strategies to mitigate the impact of heavy rainfall and potential flooding [3][8][10]. Monitoring and Early Warning - Sichuan has implemented advanced monitoring systems, including phased upgrades to rainfall radar technology, to predict risks of mountain floods and mudslides, enhancing the ability to respond to severe weather events [5][6][7]. - Real-time rainfall data from over 50 kilometers away is utilized to assess flood risks, allowing for timely evacuations of affected populations [6][7]. Flood Response - The province has effectively managed floodwaters through coordinated operations of key water infrastructure, such as the Zhipingpu Reservoir, which has significantly reduced peak flood flows by 60% [8][10]. - The combined efforts of various water management projects have successfully lowered water levels in critical areas, preventing severe flooding in urban centers [9][10]. Risk Assessment - The use of high-tech diagnostic tools for monitoring dam safety has been introduced, moving away from traditional manual inspections to a more data-driven approach [11][12]. - The province is also focusing on enhancing monitoring capabilities for sudden natural disasters like mountain floods and mudslides through innovative technologies [13]. Water Resource Management - Despite current flood management successes, concerns about potential drought conditions in the future have prompted efforts to ensure adequate water reserves are maintained [14]. - As of early July, Sichuan's water conservation efforts have resulted in over 70 billion cubic meters of stored water, providing a buffer against possible drought scenarios [14].

Summary of the Conference Call for Narui Radar Company Overview - **Company**: Narui Radar - **Industry**: Meteorological and Hydrological Radar Key Points and Arguments 1. **Profit Growth**: Narui Radar's profit for 2024 is expected to grow by approximately 400% year-on-year, driven by a significant increase in orders from the meteorological and hydrological surveying sectors, with meteorological orders increasing over twofold and hydrological radar orders nearly quadrupling, although some orders will be carried over to 2025 [2][4][30] 2. **Market Outlook**: The company anticipates continued strong performance in the meteorological and hydrological markets, benefiting from global weather disasters and China's severe disaster prevention and mitigation situation, with the government placing high importance on disaster warning capabilities [2][5][6] 3. **Military Orders**: As of April 2025, the company has accumulated approximately 150 million yuan in new military orders, with 110 million yuan added in the first quarter, indicating a significant growth trend in military contracts [2][9] 4. **Total Orders**: The total order amount for 2024 is 800 million yuan, with approximately 250 million yuan from Guangdong province and 550 million yuan from outside the province. All new orders of 150 million yuan in 2025 are from outside the province [2][13] 5. **Gross Margin**: The gross margin for hydrological and meteorological radar products is around 70%. The decline in gross margin in 2024 is attributed to lower product prices and a higher proportion of infrastructure projects, with a combined gross margin of approximately 70% to 75% when excluding infrastructure impacts [2][12][19] 6. **Backlog Orders**: As of the end of the first quarter of 2025, the company has a backlog of undelivered orders totaling approximately 500 to 600 million yuan, with revenue of about 80 million yuan confirmed in the first quarter [2][20] 7. **Order Delivery Issues**: Some orders were carried over to 2025 due to delays in supporting projects caused by clients, but confidence remains high for completing the previous year's orders [7][10] 8. **Market Competition**: Key competitors in the meteorological radar sector include Zhejiang Huasheng Meida, Beijing Huayun Group, and others. In the hydrological radar sector, competitors include Aerospace 23 Institute and others [14][15] 9. **Technological Advantage**: The company has a strong competitive advantage in the market due to its established technology, cost control, application effectiveness, and high customer recognition, achieving a market share of 60% in the meteorological sector [16] 10. **Sales Performance**: In 2024, the company sold 79 radars, with a roughly equal distribution between hydrological and meteorological radars, and most sales occurring outside Guangdong province [17][18] Additional Important Information 1. **Market Demand for Radar**: The market demand for X-band meteorological radars is substantial, with an estimated need for around 1,000 phased array weather radars and over 1,000 rain measurement radars across key flood-prone areas [21][24] 2. **Future Product Development**: The company is actively developing S and C-band radars, with expectations for significant market opportunities as the government updates its radar network [22][30] 3. **Acquisition of Sigma**: The acquisition of Sigma aims to meet the demand for next-generation phased array radar chips and expand into the CDS niche market, with Sigma being a key supplier for major companies like Huawei [3][29] 4. **Overall Market Outlook**: The company holds an optimistic view of future market performance, expecting stable demand in the meteorological sector and significant growth in the hydrological sector over the next two years [30][31]