(report producer/author: Guotai Junan Securities, Peng Lei, Wang Rui, Liu Ximing)
1, Review of the military industry sector in the first quarter of 2022 Review of Q1 2022: The military industry sector has a large pullback, and may have entered the gold allocation period
00 The military industry sector has a large pullback after the beginning of the year. From the beginning of 2022 to March 25, the military industry sector has an absolute return of -21.80%, and the relative return is -10.06%. On the one hand, affected by market sentiment, as a high-growth industry, the military industry sector has significant pullback pressure in the market environment where risk preference declines. On the other hand, since the beginning of the year, industry news such as " value-added tax reform " and "market products are included in the electronic components list" have triggered market concerns about the decline in profitability of military enterprises and deteriorating competition, thus aggravating the fluctuations in the military sector. We believe that the high growth of the military industry in 2022 is confirmed, and the sector is at the bottom. Coupled with geopolitical catalysis, the value of sector allocation is highlighted.
2022 Q1 Review: Last year, the popular stocks performed mediocrely, and theme stocks had the highest growth rate
2021 stocks mainly include midstream and upstream enterprises in the industrial chain such as national defense informatization and materials and processing. National Defense Informatization: Upstream component suppliers such as Unigroup Guowei , Zhenhua Technology , Gueststong , and Jingjiawei benefited from the explosion of 's independent controllable and equipment demand, and the continuous growth of performance has driven the explosion of stock prices. Materials and processing: Fushun Special Steel , AVIC Heavy Machinery , AVIC Heavy Machinery , AVIC Technology , Parker New Materials and other raw materials and processing companies benefit from the high prosperity of aerospace, and their rapid performance has driven the stock price to rise.
Profit growth has accelerated significantly, and the upward trend of fundamentals has been established
19 to date, the revenue growth rate of the military industry has been 11.22%/10.92%/20.31%, and the profit growth rate of 3.73%/32.73%/43.07% has been continuously increasing. The industry's high prosperity logic has been continuously verified in the financial statements.
mid-to-upstream continues to grow at high growth, and the industry's prosperity is gradually showing
21Q1-Q3 in the downstream link. According to statistics from the industry chain link: On the revenue side, the highest growth rate of upstream components and materials is 29%/25%, the growth rate of midstream subsystems has also reached 22% quickly, and the growth rate of downstream assembly plants is 8%; on the profit side, the growth rate of upstream components and materials is still the highest growth rate of 62%/52%, the growth rate of midstream subsystems has also reached 39%, and the growth rate of downstream assembly plants is 36%, and the improvement of marginal profits has begun to appear.
2, aerospace is expected to grow rapidly in the 14th Five-Year Plan supply: the upstream competition is relatively fierce, and the downstream is mainly monopoly and oligopoly
Due to the strong economic attributes of demand planning, the military industry chain has the characteristics of counter-economic cycles, and the core assets are mainly military industry of central enterprises.
Matching national defense and economic strength drives long-term growth of the industry
"Proposal of the Central Committee of the Communist Party of China on Formulating the 14th Five-Year Plan for National Economic and Social Development and the Long-Term Goals for 2035" proposes that it is necessary to "accelerate the modernization of national defense and the military, and achieve the unity of enriching the country and strengthening the military", "improve the quality and efficiency of national defense and the military's modernization", and "promote the simultaneous improvement of national defense and economic strength". my country has become the world's second largest economy, with the total amount of GDP being about 77% of that of the United States. However, my country's military expenditure is only about 32% of that of the United States, and the proportion of military expenditure/GDP is about 1.42%, far lower than the United States' 3.39% and 2.4% below the global average. National defense investment lags far behind economic development , and the matching of national defense and economic strength will drive the industry's long-term growth.
equipment construction benchmark against the long-term growth of the international advanced drive industry
From the perspective of advanced equipment benchmark, according to the public data of the "2021 WORLD AIR FORCES": my country's third and fourth-generation fighter jets were installed less than 1,000, while the total number of the United States exceeded 3,000; my country's helicopters were even larger than the United States. my country's 10-ton general-purpose helicopters were just installed during the 13th Five-Year Plan period, while the total number of the United States exceeded 2,800; my country's transport aircraft started late, and there was a big gap compared with the United States. The essence of the battle of strength among major powers is military combat readiness, which ultimately depends on nuclear deterrence.According to data from the Stockholm International Peace Institute in Sweden, the existing nuclear warhead in the United States is dozens of times that of China, and the difference in ownership is huge.
The centenary goal of the founding of the army drives rapid growth of the industry in the 14th Five-Year Plan
19th National Congress and the "National Defense White Paper" formulate strategic goals for China's national defense and military construction in the new era, basically achieve mechanization by 2020, make significant progress in informatization construction, and greatly improve strategic capabilities; strive to basically achieve national defense and military modernization by 2035; and build the People's Army into a world-class army by the middle of this century.
For the first time, the Fifth Plenary Session of the 19th Central Committee of the Communist Party of China proposed to ensure the achievement of the centenary goal of the founding of the army by 2027, enriching the goals, tasks and development steps of national defense and military modernization, and forming a new "three-step" strategic arrangement for national defense and military modernization from 2027 to 2035 and then to the middle of this century, laying a blueprint for the development of the cause of strengthening the military in the new era.
aerospace equipment has become the key to winning the battlefield
aerospace equipment has become the core element of winning the battlefield. Referring to the development experience of the US military and combining with my country's national conditions, it is expected that the third and fourth generation aviation/ aerospace equipment will be expected to become the focus of equipment cost investment during the 14th Five-Year Plan period.
Aerospace: It is expected to grow rapidly in the next five years
Considering that contactless combat will increase the demand for traditional aerospace equipment in the future, we expect that the growth rate of my country's aerospace field will further accelerate during the 14th Five-Year Plan period.
Aerospace Electrical Appliances: my country's leading aerospace connector company, with a high proportion of aerospace business. In the next five years, it will significantly benefit from the rapid growth of the industry dividend , and its performance elasticity is relatively large.
Philiphua: The leading domestic quartz fiber , mainly used in the aerospace field, will continue to have a high prosperity in the next five years, and will gradually develop into the field of high-value composite materials, opening up space for growth.
Hongyuan Electronics: One of the three major military MLCC suppliers in China, with aerospace as the main downstream. Demand will be prosperous in the next five years, and DC filters will open up space for growth. (Report source: Future Think Tank)
Aerospace: Satellite Internet is expected to bring incremental demand
Satellite Internet refers to laying a satellite network in outer space and "moving" the Internet to space. Ground users can connect and communicate through terminal devices, similar to portable Wi-Fi, which truly achieves no blind spots coverage.
my country is actively planning to build satellite Internet. State-owned enterprises: Aerospace Technology , Aerospace Technology and Electronic Technology Group respectively launched the Hongyan, Hongyun and Astronomy Constellation Plans. Private enterprises: Galaxy Aerospace, Zero One Space, Blue Arrow Space and other private enterprises are also actively deploying satellite Internet. In the future, we need to focus on solving problems: mass production of satellites, launching and rocket recycling technologies. Unlike the small-batch and customized production characteristics of traditional aerospace equipment, the demand for satellites in the satellite Internet has increased significantly, and it is necessary to significantly reduce the cost of a single star to form high-density network coverage. In the future, rocket recycling technology, multiple satellites technology with one satellite, and mass production of satellites are the keys to cost reduction.
Aviation: Entering the 20th era, fighter , helicopters, transport aircraft, and engines are expected to benefit
The overall strength of my country's air force is insufficient: my country's military aircraft ranks third in the world, accounting for 6% of the world's military aircraft, while the United States has 13,407 military aircraft, 4.4 times that of my country, and more than the total number of military aircraft in five countries including Russia, China, India, Japan, and South Korea. As my country's new generation of military aircraft are successively put into service, the Air Force has fully entered the 20th era, and will gradually narrow the intergenerational and quantitative gap between military aircraft with developed countries in the future.
Aviation: Fighter upgrade and replacement demand is strong
Fighter: There is a generational gap between my country and the United States, and there is a large demand for update and replacement. Third-generation aircraft represented by F-15, F-16, and F-18 already accounted for 71% of the number of US fighter jets, fourth-generation aircraft represented by F-22 and F-35 accounted for 9%, while third- and fourth-generation aircraft of my country's Air Force are less than 30% of that of the United States.
Aviation: 10-ton helicopters have great production potential
Helicopters: 10-ton helicopters have great production potential and are expected to become a new driving force in the industrial chain.The total volume is insufficient: in 2021, there are as many as 5,434 military armed helicopters in the United States, accounting for 27% of the global total; Russia has 1,540, accounting for 8% of the global total; my country's military helicopters have a military helicopter number of less than 20% of the United States. Structure needs to be optimized: The United States currently has 2,861 Black Hawk helicopters. my country's new generation of general-purpose helicopters are similar to the United States' Black Hawk. They are both 10-ton general-purpose helicopters, which will fill the gap in my country in this ton in the future.
Aviation: Fly-engine separation and two aircraft special projects help aircraft engine imports to replace
Aviation engine is the "heart" of the aircraft. Due to the high technical barriers in the industry, only the United States, Russia, Britain, France, China and only five countries in the world can independently develop it. At present, the whole machine manufacturing and high-temperature material are the shortcomings of my country's aviation engines. Some military engines have been localized, while civilian engines mainly rely on imports. With the establishment of Aerospace Development Group and the special investment of two aircraft of 100 billion yuan, it is expected that the development of domestic Aerospace Development is expected to accelerate.
Aviation: In the next 20 years, the market space of aerospace engineering is expected to reach trillion-level
Military aviation engines: my country's market space is US$45 billion from 2017 to 2026. Civil aviation engines: The global market space will be about US$1.45 billion in the next 20 years, of which my country's market space will be about US$300 billion.
3, preferred industry leader 2022 Outlook: Marginal changes mainly come from three aspects
Central enterprise reform: Central enterprises have great potential for improving quality and efficiency in military industry, and equity incentives for listed companies may be the main direction of reform, and corporate operating efficiency is expected to continue to improve.
Independent and controllable: industry supply chain security is crucial, weapons and equipment are autonomous and controllable, and the localization of key raw materials, components, and subsystems may face major opportunities.
value proportion increases: There are two ways to increase the value proportion of : one is product expansion; the other is the increase in the application value of the product in unit equipment. The increase in value share is expected to drive industry leaders to achieve growth rates that surpass the industry.
report excerpt:
(This article is for reference only and does not represent any of our investment advice. If you need to use relevant information, please refer to the original text of the report.)
selected report source: [Future Think Tank]. Future Think Tank - Official Website
