Brief Review Report on National Defense Industry

　　AVICProposed absorption mergerAVIC Electromechanical. May 26,AVIC ElectromechanicalandAVICReleased “About Planning for Significant Assets”reorganizationSuspensionannouncement》: In order to reorganize and form an important airborne system listing platform of AVIC, and accelerate the development of airborne system business,AVICintendedAVIC ElectromechanicalwholeshareholderThe way of issuing shares, swapping shares, absorbing and merging AVIC Electromechanical and raising supporting funds. Trading in the company’s A shares has been suspended since the market opened on May 27, and the trading suspension is expected to last no more than 10 trading days.resulting inMilitary industrySOE reformDeepening, asset integration and high-quality asset injection are expected to further accelerate, this weekAerospace Science and TechnologysubordinateZhongtian RocketSubordinate of Aerospace Science and Industryaerospace developmentand China Electric Power SubsidiaryTianao ElectronicsShares rose 19.1%, 13.4% and 10.9%, respectively.

Aviation Industry Group increased its shareholding in its subsidiaries, demonstrating confidence in its development. May 25AVIC OptoelectronicsAnnouncement, “AVICsecurities“Jufu Select No. 2” has recently increased its holdings of the company’s shares by 30.0674 million yuan, accounting for 0.0330% of the company’s total share capital; and will continue to increase its holdings of the company’s shares in the next 6 months, with a cumulative increase of not less than 37.5 million yuan and not more than 75 million yuan.AVIC Hi-TechAnnounced on the same day, “AVICsecurities“Jufu Select No. 2” recently increased its holdings of the company’s shares by 48.3629 million yuan, accounting for 0.1451% of the company’s total share capital; and will continue to increase its holdings of the company’s shares in the next 6 months, with a cumulative increase of no more than 75 million yuan. Holding plan It shows the confidence of the Aviation Industry Group in the future development of the listed company.

The economic expansion of the industrial chain is conducted in an orderly manner, and the value of sector allocation is prominent.Military industrySince 2022, under the influence of market sentiment and other factors, the sector has experienced a sharp correction. CSIMilitary industryThe index is down 27.1% this year. The logic of the industry’s economic expansion remains unchanged. The advance receipts of downstream enterprises verify the landing of large orders, which will be transmitted to the upstream and midstream in an orderly manner along the industrial chain. During the “14th Five-Year Plan” period, the demand of supporting enterprises is highly certain. The valuation of the CSI Military Industry Index is 53 times, which is at the 9% quantile of historical PE, and continues to be optimistic about the value of the sector’s allocation under the current position.

Grasp the main line of aviation equipment investment, and military electronics have high independent and controllable growth. 1) OEMcontractDebt + advance payment verification, the growth of the aviation industry chain will continue to be realized.performanceThe transmission is effective. From the main engine plant and engine system, to the airframe system and components, and then to the upstream raw material sector, the prosperity of the entire industry chain is highly deterministic.OEM concernAVIC Shenfei、Air China West、Hongdu Airlines、Zhongzhi Co., Ltd.、Aviation power; Airframe systems focus on AVIC, AVIC,Flight control、North Morocco High-Tech;Focus on aviation forgings and partsAVIC Heavy Machinery、Parker New Materials、Aerospace Technology、Triangle Defense、Aileda; Metal Materials ConcernFushun Special Steel、Western Superconductivity、Baotai Co., Ltd.、Steel Research Gona、Tunan Shares; Composites concernAVIC Hi-Tech、Guangwei Composites、Zhongjian Technology. 2) The certainty of missile weapons and equipment benefits from actual combat military training, and the autonomous and controllable military electronics in the field of high-end equipment brings high growth.focus onAVIC Optoelectronics、Zhenhua Technology、Aerospace appliances、Hongyuan Electronics、ThunderboltWait.

Risk warning: The epidemic has repeatedly affected the macroeconomic environment; equipment research and development progress and procurement progress are less than expected; military procurement prices have fallen; industry competition has intensified.

(Article source: Firstsecurities）

Article source: Capital Securities

Responsible editor: 91

Original title: Brief Review Report on National Defense Industry