Recently, although the market has been volatile, the stock prices of leaders in photovoltaics, new energy vehicles, and chips are still rising, and their valuations have also reached sky-high levels. However, some institutional bosses have also given warnings. For example, "Public Fundraising Brother" Zhang Kun said that some of them have overdrawn their performance in the next few years, and a decline in expected returns in the next few years may be unavoidable.
So what are the themes that are currently on the rise and have moderate valuations? The answer may be different for everyone, but it will most likely be mentioned in high-prosperity tracks - the military industry.
Industrial Securities Global Chief Strategist Zhang Yidong shouted: The current military industry is very similar to the new energy vehicles of the past two years.
Zhu Bin, chief strategist of at Southwest Securities, also said: The military industry will become a must-have sector for a long time to come.
Next, hardcore base selection will let you see how attractive the military industry sector is?
1. The military industry has actually entered the period of prosperity.
The military industry sector is not a good choice in the minds of many old Christians, because the military industry sector has a strong explosive power when it rises, but once it starts to fall, it may be cut in half. Many people will Classifying institutions as event-driven concept sectors will only cause speculation when major military events occur, but will often fall back.
The main reason for this situation is that in the military industry, before 2020, the three major military reforms (military establishment system reform, military product pricing mechanism reform, military representative system reform) have not yet been fully implemented. What has really changed in essence is In the third quarter of 2020, orders from some upstream military companies began to increase significantly. (For details, please refer to "Institutions are fully optimistic about the performance of the military industry in the 14th Five-Year Plan and have transformed into growth stocks" in November 2020.
Under performance expectations, the military industry sector quickly rushed to this round in January However, due to factors such as excessive short-term gains, tight liquidity, and lack of confidence in the industry, the military industry index has fluctuated and fallen for four months since January 11, with a drop of nearly 30%.
However, in military industry companies. The successive announcements of Q1 and semi-annual reports have finally dispelled the market's worries again. China Securities Military Industry has increased by more than 35% from May 11 to August 5.
115 listed companies whose core businesses are involved in the military industry. In 2021Q1, operating income was 98.1 billion yuan, a year-on-year increase of 31.49%; net profit attributable to the parent company was 6.9 billion yuan, a year-on-year increase of 7.65%. The 2021 semi-annual reports or performance forecasts released by some companies were even more gratifying:
Beimo Hi-Tech Return. Net profit of the parent company increased by 109.65% year-on-year;
Western Superconducting net profit of the parent company increased by 136.36% year-on-year;
Zhenhua Technology net profit of the parent company is expected to increase by 100-120% year-on-year;
Baoti Co., Ltd. net profit of the parent company is expected to increase year-on-year An increase of 94.16%;
AVIC Electromechanical announced an increase in the estimated sales of goods to related parties by 3 billion, an increase of 74% compared with the actual amount incurred in 2020;
The reason is that after the military reform, the performance started from the upstream supporting facilities, and then Judging from the downstream production/delivery cycle, engines (8 to 10 months) and military aircraft (10 to 12 months), expects that the delivery volume/revenue of downstream products will increase significantly from the second and third quarters of this year. The reporting period may be an important window for the military industry to continue to realize its high prosperity. Judging from the performance of military industry companies that have been disclosed, it can reflect the current situation of high prosperity in the industry to a certain extent.
2. In the second quarter, institutions increased their positions significantly
Industrial Securities Global Chief Strategy. Analyst Zhang Yidong said, "Some of the military industry companies we investigated, even some companies that are not listed, said that they have never seen such good orders and prosperity in decades. However, the market has not fully reflected the growth of the military industry. I still think it’s just a thematic investment. Last year’s annual report and this year’s first quarter report were both lower than expected. The interim report should be very good, but investors are still worried about the sustainability of performance. Therefore, I feel that ’s current military industry is very similar to the new one in the previous two years. Energy vehicles, or new energy going forward. ”
Similar to the above statement, institutional investors made the best explanation with their actions in the second quarter.
Recently, major funds have announced their second quarter reports for 2021. Overall, the total market value of military industry holdings, which are heavily held by public funds, is 113.212 billion yuan, a record high. The over-allocation range of active fund expanded from 0.34pct to 0.42pct, but the over-allocation range of passive funds narrowed from 2.78pct to 2.28pct.
In the second quarter, the active fund's military industry position proportion and market value rebounded significantly, with the market value increasing by 25.80% month-on-month and the position proportion increasing by 0.20pct month-on-month. Positions focus on the middle and upper reaches of the industrial chain, and the proportion of positions at each supporting level is basically the same. Breaking it down:
(1) General Assembly: The market value of active fund holdings in 2021Q2 was 12.1 billion yuan, a month-on-month increase of 2.2 billion yuan, accounting for 15% of all heavyweight military stocks.
(2) sub-system: The market value of active fund positions in 2021Q2 was 15.8 billion yuan, a month-on-month increase of 2.9 billion yuan, accounting for 20% of all heavyweight military stocks.
(3) Parts: Active fund holdings in 2021Q2 were 52.8 billion yuan, a month-on-month increase of 11.5 billion yuan, accounting for 65% of all heavyweight military stocks.
Looking specifically at stocks :
The top ten stocks heavily held by public funds in 2021Q2 are Ziguang Guowei , AVIC Optoelectronics , Zhenhua Technology, AVIC Shenyang , Aviation Engine , Fushun Special Steel , AVIC Hi-Tech, Amap Infrared , Torch Electronics, 712, the information sector has become the key configuration, and the proportion of the aviation sector has declined slightly.
2021Q2 Compared with 2021Q1, Fushun Special Steel, Torch Electronics, and 712 are listed, while Ruichuang Micronano, AVIC Electromechanical, and Hongyuan Electronics are out of the list.
3. "A strong country must have a strong army" was mentioned again at major meetings
Not long ago, it was mentioned at a meeting of the Political Bureau of the CPC Central Committee: A strong country must have a strong army, and a strong army can lead to national security; the "14th Five-Year Plan" for our army's construction is very important for realizing the centenary of the founding of the army. The goals of the struggle were strategically deployed. It is necessary to persist in leading the construction with war, strengthen the coordination of war and construction, make good preparations for military struggle, and form a good situation in which war, construction and preparation are promoted in an integrated manner; achieving the centenary goal of the founding of the army is the responsibility of our army and the responsibility of the whole party and the country. responsibility.
In 2020, my country's investment in the military industry was approximately 1.3 trillion, ranking second in the world after the United States. At present, my country's military expenditure accounts for only 26.19% of the United States' military expenditure. my country's military expenditure accounts for 1.31% of GDP, while that of the United States is 3.53%.
In addition, there is still a significant gap between China and the military powers in the world today in terms of the total quantity of weapons and equipment and the combat performance of weapons and equipment. From the perspective of matching national defense and economic strength, there is still a lot of room for China's military investment to increase in the future.
Therefore, no matter from the perspective of the country’s emphasis or objective national defense needs, my country’s military industry has a long-term growth logic. In the next seven years, the military industry will highlight its rigid demand advantages. The intensification of the game between major powers is a long-term trend, and peripheral tensions are difficult to ease in the short term. Peace needs to be defended, and increasing investment in national defense is a must. The long-term trend of the military industry is improving.
4. How to solve the problems of timing and stock selection?
Although the military industry sector has a strong upward trend in recent days, the market has always had a historical bias against it, which takes time to educate the market. Therefore, severe fluctuations may still be the norm. In addition, there are still internal divisions among the stocks in the military industry sector, and there are also differences in rhythm in performance.
Obviously, the issues of timing and stock selection are particularly important for investment in the military industry sector. So how to solve the problem? For industry themes that are highly aggressive and have strong retracement,
recommends low-position fixed investment to absorb chips in batches, select theme funds as targets, and then gradually sell when there is a big rise, waiting for the next band opportunity to come. In this way, the rate of return will be more objective.
The military industry indexes currently tracked by the military index funds on the market are concentrated in five indexes: National Securities Military Industry, CSI Military Industry, CSI National Defense, Military Industry Index, Air and Space Integrated Index. Among them, the China Securities Military Industry Index is more resilient and has less fluctuations, while the China Securities Military Industry Index has more advantages in long-term performance. Let’s take a closer look at the National Government and Military Industry Index and the CSI Military Industry Index, as well as the ETF fund that tracks the index.
1) The top ten constituent stocks of the National Securities Military Industry Index are as follows, Ziguang Guowei (8.7%), Aviation Power (6.34%), AVIC Optoelectronics (4.8%), AVIC XAC (4.0%), AVIC Shenyang Aircraft (3.96%) ), Fushun Special Steel (3.68%), China Heavy Industries (3.47%), Zhenhua Technology (3.15%), China Great Wall (3.0%), and China Shipbuilding (2.86%).
2) CSI Military Index: Its top ten constituent stocks are as follows, AVIC Power (7.34%), AVIC Optoelectronics (5.72%), AVIC XAC (5.06%), AVIC Shenyang Aircraft (5.01%), China Heavy Industry (4.36%), Zhenhua Technology (3.71%), Kuangchi Technology (3.42%), AutoNavi Infrared (3.23%), Aerospace Development (3.17%), AVIC Hi-Tech (2.87%)
3) There are currently a total of in the market There are 6 military industry ETFs, among which the China Thailand CSI Military Industry ETF was established the earliest, with the latest scale of 13.146 billion yuan, but the year-to-date return is only 3.77%.
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Fund investment is risky, so be cautious when entering the market. The above fund types are not investment suggestions.
The relevant information comes from public market materials and is for reference only and does not constitute the basis for investment decisions. Investment involves risks, so be cautious when investing.
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