Investment Rating - The industry investment rating is "Positive" [4] Core Viewpoints - The India-Pakistan conflict has highlighted the performance of domestic weapons, aiding the expansion of the global military trade market. Pakistan's military success in this conflict, particularly with Chinese exports like the J-10C fighter jet, has increased the recognition of Chinese military equipment in international markets [1][6]. - Geopolitical tensions are driving the military trade market expansion. The increasing security demands of various countries, coupled with China's competitive military products, are expected to fill the gaps left by declining military exports from other nations. This trend positions the military trade market as a new growth driver for China's military industry [2][7]. - The capital market has reacted positively, with the defense and military sector index rising by 4.64% from May 7 to May 12, 2025, indicating heightened investor interest and optimism in the military sector due to the recent conflict [2][8]. Summary by Sections Section 1: Performance of Domestic Weapons - The India-Pakistan conflict in May 2025 saw Pakistan claim the downing of multiple Indian aircraft, including the French-made Rafale. This conflict provided a platform for Chinese military exports, particularly the J-10C fighter jet, which played a significant role in Pakistan's military achievements [1][5][6]. Section 2: Geopolitical Factors Driving Market Expansion - The report emphasizes that the trend of de-globalization and increased geopolitical uncertainty is enhancing the global military trade logic. China's military products, known for their cost-effectiveness and technological advancement, are expected to meet the rising demand in the military trade market as other countries face export declines [2][7]. Section 3: Key Investment Targets - The report identifies three key companies for investment: 1. **AVIC Chengfei**: Focuses on aviation equipment, including fighter jets like the J-10 and J-20, which have gained international recognition [10]. 2. **AVIC Shenyang**: Engaged in manufacturing military aircraft, with products like the J-11 and J-16, benefiting from the growing international military trade market [11]. 3. **Guokai Military Industry**: Specializes in missile and ammunition production, with products that have proven effective in recent conflicts, indicating strong future growth potential [12].