Entering 2019, the defense military industry sector emerged. On January 3, 4 and 7, the National Defense Military Industry (880507) index rose continuously, with a cumulative increase of 7.55%, winning the first prize in the A-share sector in the New Year! In the sector, stocks such as Aerospace Communications, Tefa Information, Pengqi Technology, and Jingming Sharp Machinery have hit the daily limit continuously. The leading Aerospace Communications has increased by nearly 60% in just five trading days since 2019!
On the news front, January 2 is the 40th anniversary of the publication of the "Message to Compatriots in Taiwan". Senior leaders emphasized that the motherland must be unified and must be unified. As the most relevant military industry sector, it emerged!
Military Industry Index fell to the starting point of the last bull market
Military Industry sector has gone through three stages since 2012:
The first stage ended 2012-early 2014, and the counter-trend strengthening was mainly due to the Obama Asia-Pacific rebalancing strategy that led to the heating of geopolitics in the East China Sea and the South China Sea; the second stage rose simultaneously with the bull market in mid-2014-2015; the third stage is a long way to find the bottom until now. From the perspective of the decline, military-industrial stocks have fallen to the starting point of the last bull market and have initially met the conditions for stopping the decline.
The overall estimation of the military industry sector tends to be reasonable:
After more than three years of adjustment, the valuation of the military industry sector has gradually become reasonable. The PE valuation of the sector is about 60 times. Excluding the impact of losses such as ships, the PE valuation is about 50 times. AVIC Aircraft , Zhongzhi Shares, AVIC Shenfei , Inner Mongolia First Aircraft, AVIC Power and other military industry leaders, the PS valuation is about 2 times. The PE PE of the military industry blue-chip stocks such as AVIC Mechanical and Electrical Appliances, AVIC Electrical Testing, and Aerospace Electronics is about 30 times, which is below the historical average level and tends to have reasonable allocation value.
Institutional holdings are at the bottom of the history:
Judging from the institutional holdings in the third quarter of 2018, the proportion of holdings in the military industry was 1.62%. Although the overall over-allotment was 0.1 percentage point, it is still at a historical low in the past five years. Among them, military-level funds, military-industry ETF funds and military-industry theme funds account for nearly 60%, and other institutional investors who actively allocate are still relatively few.
reform is expected to accelerate, and it is expected to release the development potential of military enterprises , and increase the attention of sectors:
military work is a key area of reform, and various reforms have been continuously promoted. As the "13th Five-Year Plan" enters the second half of the process, the intensity of reform and the pace of implementation are expected to accelerate. We should focus on the three aspects of military industry asset securitization , pricing mechanism reform, and incentive mechanism reform. Through these reform measures, on the one hand, more and more high-quality military assets will be realized into listed companies, and on the other hand, it will stimulate the company's potential and improve the company's profitability. The trend of good fundamentals in the military industry is expected to gradually be reflected in listed companies. At the same time, the continuous introduction and implementation of reform measures is expected to continue to increase the attention of the military industry sector.
The fundamentals of the military industry continue to improve, and the countercyclical attributes highlight comparative advantages:
While the current macroeconomic growth rate is under pressure, the countercyclical attributes of the national defense and military industry sector are becoming increasingly prominent. From the perspective of industry fundamentals, the defense and military sector achieved a total revenue of 221.13 billion yuan in the first three quarters of 2018, an increase of 15.2% year-on-year; and achieved a net profit of 8.86 billion yuan, an increase of 17.9% year-on-year.
The military reform in 2015 has a great impact on the recognition of orders and revenue in the military industry. At present, this adverse impact is gradually eliminating. Some institutions counted the performance of 61 listed companies in the National Defense and Military Industry (CITIC First-level Industry) from 2013 to the first three quarters of 2018 and found that all operating income achieved positive growth, and the net profit attributable to shareholders decreased significantly in 2015, and there was no significant year-on-year change in 2017, but returned to the growth track in 2108.
Zhongtai Securities believes that the military expenditure growth rate bottomed out and rebounded, the impact of military reform was gradually eliminated, and the five-year cycle of weapons and equipment construction was loosened before and after tightening. In addition, the speedup of new equipment in the sea and air equipment has driven the centralized release of orders in the military industry, bringing greater flexibility to the performance of military enterprises.
Huachuang Securities analyst Wei Zhe predicts that investment in the defense industry is expected to continue to strengthen, and the fundamentals of the military industry are relatively certain, especially the overall economy is currently on a downward trend, highlighting the industry's comparative advantages.It believes that the reform of the military industry system is expected to continue to be promoted this year, including reform measures such as asset securitization, pricing mechanism and incentive mechanism. On the one hand, it will increase the market's attention to the military industry sector, and more importantly, it will release the development potential of military industry enterprises, improve profitability, and bring greater performance elasticity.
Military Industry Three Musketeers:
Flying on the sky: AVIC Aircraft (000768)
Company is mainly engaged in the research, development, production and sales of aviation products such as military and civilian large and medium-sized aircraft and aviation parts. It has the core technical resources of domestic large and medium-sized military and civilian aircraft, a full series of aircraft landing gears and wheel brake systems. It is mainly responsible for the research, manufacturing, sales, maintenance and services of various large and medium-sized military and civilian aircraft, landing gears and wheel brake systems. Currently, the company's main products include large and medium-sized transport aircraft, bombers, special aircraft and Xinzhou series aircraft. also undertakes the design, manufacturing, supporting and services of domestic and foreign large and medium-sized civil aircraft such as ARJ21, C919, and AG600. has long-term and stable cooperative relationships with internationally renowned airlines such as Airbus, , Boeing, and in the field of subcontracting production.
As the only assembly enterprise of large and medium-sized military aircraft in my country, the company has a stable core market position and fully benefits the construction of the strategic air force. In the field of civil aircraft, on the one hand, the company's Xinzhou series has delivered more than 100 aircraft, which is an important force in my country's regional passenger aircraft; on the other hand, the company's deep participation in the ARJ-21 and C919 supporting facilities is the backbone support for the development of domestic civil aircraft. The company's new model Xinzhou 700 has reached 285 aircraft, and the cumulative orders of participating models ARJ-21 and C919 have reached 528 aircraft and 815 aircraft respectively. With the gradual growth of domestic civil aircraft, civil aircraft business is expected to become another important driving force for the company's development.
Navy travel: China Heavy Industry (601989)
China Heavy Industry As the listed flagship of China Shipbuilding Industry Group Corporation, it is the strongest and largest ship equipment enterprise in my country. Dominates the market in the traditional business areas of marine power and components, marine auxiliary machinery and other ship equipment.
China Heavy Industry is a listed company in the entire industry chain of ship research and development, design and manufacturing. Its main business covers five major business segments, including military industry and trade, ship manufacturing and repair and modification, ship equipment, marine economy, energy and transportation equipment and technology industry.
is divided into uses, and the company's core business includes the research, development, design and manufacturing of marine defense equipment, marine transportation equipment, marine scientific research equipment and marine development equipment; from the field, the main business is divided into military products business areas and civilian products business areas. , as the main supplier of naval equipment, mainly includes: aircraft carriers, nuclear-powered submarine (subcontract), conventional powered submarine , large, medium and small surface combat ships, large amphibious assault ships, military auxiliary ships, etc. 's private goods business areas mainly include: bulk carriers, container ships, oil tankers, gas ships, offshore engineering equipment, scientific research ships and other equipment.
According to the query data of Zhiliao Research Institute, as the core warship target, the company continued to receive large-scale increase in holdings by major shareholders after the decline:
The first increase in holdings:
From August 8, 2018 to October 11, 2018, China Shipbuilding Industry Corporation increased its holdings of the company's shares by a total of 122 million shares, accounting for 0.5341% of the company's total share capital. The average increase price was 4.083 yuan per share, and the cumulative increase amount was 4.99 yuan.
The second increase in holdings:
From October 12, 2018 to December 6, 2018, China Shipbuilding Industry Corporation increased its holdings of the company's shares by 110 million shares, accounting for 0.4840% of the company's total share capital. The average increase price was 4.137 yuan per share, and the corresponding increase amount was 458 million yuan.
The third increase in holdings:
China Heavy Industry Controlling shareholder China Shipbuilding Industry Corporation increased its holdings of the company's shares by 5,500,000 shares through the Shanghai Stock Exchange trading system on December 10, 2018, accounting for 0.0240% of the company's total share capital. The average increase price was 4.229 yuan per share, corresponding to an increase of 23.25 million yuan.China Shipbuilding Industry Corporation and its joint actors plan to continue to increase their holdings of the company's shares through the Shanghai Stock Exchange trading system within 6 months from the date of disclosure of this announcement, on the premise of complying with relevant regulations of the China Securities Regulatory Commission and the Shanghai Stock Exchange, with a total increase of RMB 100 million to RMB 500 million (including the amount of increased holdings this time).
Running on the ground: Inner Mongolia First Class (600967)
China Ordnance Industry Group Inner Mongolia First Machinery Group Co., Ltd. is one of the 156 key construction projects during the "First Five-Year Plan" of New China. It is an important industrial base of the country that integrates tracked, wheeled and rail-type heavy vehicles. It is also a key enterprise of the national security army and the largest equipment manufacturing enterprise in the Inner Mongolia Autonomous Region.
company's military products have formed a coordinated development of wheels and footwear, light and heavy, and vehicle-cannon, serving the development and production pattern of multiple military branches such as the land, sea, air, and rocket forces, and have achieved the expansion and transformation of combat, support, firepower strike and integrated information equipment, becoming the only country's main battle tank and 8×8 wheeled combat vehicle research and development base.
civil products business. Railway vehicles can currently develop and produce more than 50 models of truck products in six series, including open cars, tank trucks, flat trucks, box trucks, funnel trucks, and special vehicles. The load capacity covers a full range of models with a load capacity of 60 tons, 70 tons, 80 tons to 100 tons, and has the production capacity of 8,000 complete vehicles and supporting core components per year.
Company vigorously promotes the in-depth development of military-civilian integration , and cultivates and develops a large number of highly competitive military-civilian integration products. More than 20 military-civilian integration products, including 4×4 high-protection special vehicles, tracked fire trucks, riot guard cabins, simulated trainers, individual protective products, etc., have become the company's new economic growth points.
