Industry Investment Rating - The industry investment rating is "Outperform the Market" and is maintained [1] Core Viewpoints - The report highlights the first deployment of US nuclear weapons in the UK in 17 years, with the B61-12 thermonuclear gravity bombs being stationed at RAF Lakenheath, enhancing NATO's tactical nuclear capabilities [4][13] - Ongoing conflicts between Thailand and Cambodia have resulted in military engagements, indicating potential geopolitical risks that may affect defense spending and military operations in the region [5][16] - Looking ahead to 2025, the military industry is expected to see a turning point in orders, driven by new technologies and products aimed at improving equipment performance and reducing costs [6][17] Summary by Sections 1. Investment Highlights - The report suggests focusing on two main investment themes: aerospace and "gap-filling" new priorities, including companies like Fihua, Fenghuo Electronics, and others [6][17] - The second theme involves new technologies, products, and market directions with greater elasticity, featuring companies such as Aerospace Intelligence and Guangdong Hongda [6][17] 2. Market Overview - The China Securities Military Industry Index rose by 1.51%, while the Shenwan Military Industry Index increased by 1.28%, indicating a positive trend in the military sector compared to broader market indices [18] - The top ten performing stocks in the military sector included Xinguang Optoelectronics (+32.55%) and Boyun New Materials (+25.16%), showcasing significant gains [19][20] 3. Valuation Levels - As of July 25, 2025, the China Securities Military Industry Index stood at 11,987.24, with a PE-TTM valuation of 118.72 and a PB valuation of 3.70, indicating a relatively high valuation compared to historical levels [21][24] - The report provides detailed valuation percentiles for various military companies, highlighting significant differences in market performance [24] 4. Data Tracking - The report tracks recent capital increases and stock incentive plans among military companies, indicating ongoing financial activities that may impact stock performance [27][29] - It also notes significant orders in the low-altitude economy sector, with a $1.75 billion order for eVTOL aircraft, reflecting growth opportunities in emerging markets [31][32]

Group 1 - The U.S. Department of Defense announced the approval of a $180 million air defense system sale to Ukraine and a $150 million maintenance service for M109 self-propelled howitzers [1] - The U.S. State Department also approved the sale of advanced surface-to-air missile systems and related components to Egypt, with an estimated value of $4.67 billion [1] - The U.S. has withdrawn from the latest round of ceasefire negotiations in Gaza, citing that Hamas did not act in good faith [1] Group 2 - Hamas issued a statement responding to the ceasefire proposal, while the Israeli Prime Minister's office decided to return its negotiation team to Israel for further discussions [2] - Since October 6, indirect negotiations between Israel and Hamas regarding a ceasefire and the exchange of hostages have been ongoing in Doha [3]

Core Points - The U.S. State Department has approved the sale of a $180 million air defense system to Ukraine [1] - Additionally, a $150 million maintenance, repair, and overhaul service for M109 self-propelled howitzers has been approved for Ukraine [1] - The U.S. State Department also approved the sale of advanced surface-to-air missile systems and related components to Egypt, estimated at $4.67 billion [1]