The long-standing military stocks have performed outstandingly recently. Some analysts believe that the A-shares' military sector has experienced major declines in the previous two years, and recent geopolitical tensions and other catalysts have continued to boost the performance of military stocks. Since 2018, the fundamentals of the military industry have been significantly improved. Reforms such as capital securitization, reform of research institutes, and pricing mechanisms have continued to deepen, and the military sector is optimistic about the market.
Military stocks lead the market
The long-awaited military-industrial stocks performed well in the near future. On Friday, Northern Huachuang (002371) and other defensive stocks rose by more than 5%, AVIC Aircraft (000768), Aerospace Communications (600677), AVIC Electromechanical (002013) and AVIC Electronics (600372) went against the market. It rose by more than 2%, with more than 1% of AVIC Shenfei (600760), China Power (600482) and China Satellite (600118).
According to statistics, in the last two months (February 13 - April 13), among the 44 defense companies in Shanghai and Shenzhen, 44 stocks in the defense industry, 35 stocks have risen more than 10%, and 17 stocks have risen more than 30%. Jianglong Boats (300589), Andaville (300719), AVIC Shenfei (600760), Xinyu Guoke (300722), Elodea (300696), Hangfa Technology (600391) and AVIC Aircraft (000768) 7 The cumulative increase in stocks is more than 40%.
Analysts said that the A-share military sector experienced a two-year period of adjustment since early 2016, with a drop of nearly 30%. In recent days, there has been continuous news, such as geopolitical tensions, China’s second aircraft carrier’s imminent sea trials, etc., which will further boost the performance of military stocks. In addition, the suppression factors of the military industry affected by the military reform in 2018 are gradually being eliminated, and the performance of the company is expected to rebound. At the same time, the system reform of military research institutes and military-civilian integration strategy will be superimposed, and the military sector will enter the configuration period.
Soochow Securities Research reported that under the switch of market style, the fundamentals of the military industry have improved significantly since 2018 (defense growth of defense spending by 8.1%, and the order repayment situation has improved significantly), capital securitization, restructuring of research institutes, pricing mechanisms, etc. The reform continued to deepen, and the overall military market situation in the second quarter was optimistic, and the strategy was optimistic for the 18-year military sector.
"In 2018, reforms in the military industry, including reform of scientific research institutes, reform of the pricing mechanism, and reform of mixed ownership systems, will continue to advance. With the adjustment of the leadership groups of the central SOEs after the two sessions, we believe that the assets injection of the military industry group will restart in 2018. Accelerate, thereby bringing about investment opportunities in the secondary market.” Dongwu Securities stated that in terms of valuation, the valuation of the military sector is at a historically low level and horizontally contrasted. A considerable portion of the military’s target is expected to be in PE in 2018 with most industries. The plate is quite.
Chen Long, an analyst at Minsheng Securities, pointed out that in the medium and long term, the impact of military reforms in 2016-2017 was that military spending did not meet expectations, and military enterprise performance slowed down. In the next three years of the 13th Five-Year Plan, the growth in military spending will be significantly higher than in the previous two years. Orders for military-industrial enterprises will return to normal, and new-type equipment will be expected to enter a period of rapid growth. In addition, the preliminary plan for restructuring the military and industry institutes has been confirmed, relevant supporting policies are expected to be introduced, and asset injection is expected to increase.
Industry performance has improved significantly
The interaction with the industry's recent secondary market performance is a significant improvement in the performance of the military sector. According to statistics, as of April 13th, of the 44 defense-military plates in the Shanghai and Shenzhen cities, 20 companies announced the performance of the first quarter of 2018. There were 13 pre-hired companies, accounting for 65% of the total. Among them, the new research shares (300159), Boyun new materials (002297), Nanyang Science and Technology (002389), Hite Hi-tech (002023), China Aviation Aircraft (000768) and China Aviation Machinery and Electrical 6 companies expect net profit growth over 100% year-on-year .
Among them, the largest pre-increase is the new research shares, the company expects to achieve a net profit of 50 million yuan to 53 million yuan in 2018, an increase of 7336% to 7782% (performance in the same period last year, net profit of 672,400 yuan), the reasons for changes in performance For a substantial increase in aerospace business income, the agricultural machinery sector disposed of idle assets; Yunxinca is expected to achieve a net profit growth rate of 322.97% to 434.45%, followed by Nanyang Technology, the company expects a quarterly net profit of 23.21 million Yuan to 25.97 million yuan, an increase of 320.00% to 37.0%.
According to announcements issued by some companies, the inflection point of military performance has indeed appeared. Such as Hager Communications (002465), the company's wireless communications and the Beidou navigation business were down 45.00% and 36.19% respectively in 2017, and the performance was significantly affected. With the gradual recovery of military procurement, Yu Qingsong, the company’s director and general manager, recently stated at the performance briefing that since the gradual implementation of the military reform in October 2017, the company has accumulated more than 1.2 billion military orders, and it is expected to gradually obtain related Business orders. According to the analysis, as orders are accelerated after the landing of the military reform, the company will benefit greatly as a leading company in Beidou navigation, satellite communications, and military communications. In the future, company performance is expected to return to growth.
Galaxy Securities reported that there is strong fundamentals and policy support behind this round of military advancement. In terms of fundamentals, the order repair logic is gradually verified with the arrival of orders for military products such as Hager Communications, Kangda New Materials (002269), and Starnet Muda (002829), as well as the higher growth of associated transactions in the China Aviation Department. On the policy front, the merger of the two ships warmed up, and the reform of the military procurement and pricing mechanism entered the annual promotion goal. The gradual release of the policy dividend is expected to significantly increase the investment risk appetite for the sector.
"Two years before the five-year procurement cycle, the military reform led to the deferral of purchase demand, which brought about a compensatory increase in military spending in the latter three years and further boosted the demand for the military industry." Shen Wanhongyuan pointed out that in recent years, it has been affected by the phased effects of the military system reform. Some of the military spending in the first two years of the procurement cycle of the year can be suppressed. This part of the military expenditure is delayed until the latter three years, and it shows a kind of compensatory growth, which provides more funding guarantees for weapons and equipment procurement.
Military reforms "breakout" soon
At the beginning of the year, seven departments including the National Development and Reform Commission, the State-owned Assets Supervision and Administration Commission, and the Ministry of Science and Technology issued the "Circular on Supporting Central Organizations to Deeply Participate in Regional Innovation and Reform Experiments", and proposed to vigorously promote the integration of military and civilian innovation. At the same time, the central SOEs should select pilot units in the reform pilot areas that undertake the task of piloting deep integration of military and civilian reforms, and actively promote reforms in joint-stock system and mixed ownership of military-industrial enterprises.
"The landing of military-military integration policy will promote the professional integration and large-scale reorganization of the military and industrial group's mixed reform field." Zhang Yuling, a military industry analyst at AVIC Securities, believes that capital-linking promotes the integration and consolidation of leading industrial groups and research institutes to enhance The integration of military and civilian resources and the large-scale reorganization of weapons and equipment system integration capability will become an important part of the mixed reform of the military industry group.
Since last year, a series of major measures to promote the integration of the military and the people have been introduced one after another, and military-civilian integration has gradually entered deep integration. In particular, the General Office of the State Council issued the "Opinions on Promoting the In-depth Development of Military and People's Integration in National Defense Science, Technology and Industry" on December 4 last year to make full arrangements for promoting the in-depth development of military-civilian integration in the defense science and technology industry. The "opinions" proposes that under the premise of ensuring security and confidentiality, all types of investment entities that meet the requirements will be involved in the joint-stock reform of military industrial enterprises.
Long Hongshan, chief engineer of the National Bureau of Defence Science and Technology, said earlier that the National Bureau of Science, Technology and Industry for Nationalities will continue to push forward the pilot project of mixed ownership reform, and it is necessary to form a batch of experience that can be replicated and promoted, and further expand the scope of mixed reform on the basis of the pilot. The Bureau of Science, Technology and Industry for National Defense will continue to encourage and support the listing of qualified military companies or introduce some military assets into listed companies.
Guoxin Securities believes that the military industry is the largest number and the most extensive sector of listed companies in central enterprises, and it is also the most difficult area for reform of central enterprises. Moreover, in the first two batches of pilot mixed reform companies, there are many companies in the military industry. Therefore, the next step in the mixed reform of the military industry will become the highlight of the mixed theme of central enterprises.
Industry sources told reporters that compared to other central enterprises, the mixed reform of the military industry group is more effective. At present, it has formed a strategic area "from civilian to military," the industry chain "from the edge to the core," at the organizational level. Bottom-up to the three main layers of advancement. Reflected in the military listed companies, the management system will be more flexible, and the performance release momentum and revaluation expectations are even stronger.
Institutional research points out that currently the asset securitization rate of the China Military Group is still low, less than 40%. As of the end of last year, the asset securitization rate of China’s 12 major military-industrial groups was calculated to be more than 60% by AVIC, and the rest of the group’s assets securitization rates were all below 50%, and the assets of the aerospace science, technology, and astronautics industries were calculated. Only 23.5% and 24.2%
Three main lines of four logical expansion layout
“Mid-term long-term military operations are basically good-looking, and short-term emotional catalysis will bring about a rebound. It is expected to emerge from the mid- to long-term market under the leadership of military leaders and white horses.” Shen Wanhongyuan pointed out that since 2018, military stocks have been rising out of the leading white horse. Quotes. In the medium and long term, with the changes in the international situation and the stabilization of domestic policies, strengthening the strong army is an important component of the idea of a strong country. With the gradual advancement of the strong military policy, the certainty and urgency of the new target of strengthening the military are strengthened. Procurement cycle, model release, order confirmation, and policy intensive release catalyze many favorable factors. Military industry has long-term investment opportunities.
In the configuration of the subject. Soochow Securities proposes to use the following three main lines of investment: The first main line deducts the mainstream military standard with high certainty and low valuation. We recommend AVIC Shenfei and Inner Mongolia (600967), AVIC Electromechanical, and AVIC Optoelectronics; The main line suggested that we pay attention to the future of the core military assets into the expected Guorui science and technology (600562), the four creation Electronics (600990), Chengfei integration (002190), the North shares (600262); the third main line of advice to focus on the low price of high quality Guan Jiawei (300474), Quanxin Stock (300447), Torch Electronics (603678), Xingwang Yuda (002829) and Naiwei Technology (300456) of the Minsheng Military Standard. At the same time, it is recommended to pay attention to the aero-engine industrial chain that the country mainly supports and inputs. It is recommended to pay attention to Air Power (600893), Airfax (000738), and Airsoft (600391).
Guohai Securities proposes to lay out the following four logical layouts: 1. At the current stage, focusing on the development of equipment and equipment with high certainty, the leading assembly companies in the field of naval and air force equipment, recommended Zhongshen shares (600038), AVIC Aircraft, AVIC Shenfei, China Power 2. The development of equipment needs to be urgently needed to break through, and the aero-engines and airborne equipment areas supported by the national policies are recommended. Avionics, Avionics, and Avionics are recommended. 3. Certain industry barriers exist, with core technical advantages, and the product market has a vast space. High-quality military-military integration standard, recommending AVIC, AVIC Hi-Tech (600,862), Reiter AG (300,600), Ferrywood (300,395), Torch Electronics, Hangxin Technology (300,424); 4. The Group's asset securitization ideas and goals are clear, The quality of in vitro assets is high, and the status of the listing platform is the subject of a recommendation. Guorui Technology and Sony Electronics are recommended.
Galaxy Securities pointed out that since the military industry's performance has been performed so far, the performance of the sector has clearly differentiated. Host manufacturers have outperformed most of the suppliers, and traditional military enterprises (up 20%) have outperformed private companies (up 13%). In the second quarter, we believe that we should focus on the “cost-effectiveness” of growth, focus on long-term safety margins, and allocate varieties with high valuations and high ROIC. We recommend Guorui Technology, AVIC Optoelectronics, Aerospace Electronics (002025), Xingyuwangda, and Su-test. (300416), Torch Electronics, etc. In addition, we are optimistic about Zhenhua Science and Technology (000733), Hai Lanxin (300065) and Quanxin Securities.
Stocks will be Taiwan
China Aviation Electromechanical (002013):
The company is a listing platform for the aviation and electromechanical divisions of AVIC. Benefited from the continuous investment of the state in military and civil aviation, the company’s aviation and electromechanical businesses have maintained a steady endogenous growth. With the continuous installation of military aircraft in China, the company’s performance can continue. To maintain steady growth; In addition, according to institutional analysis, the 609 and 610 aero-mechanical plates are the first batch of restructured research institutes. In the future, the company will also benefit from the advancement of the reform of scientific research institutes.
China Power (600,482)
The company is a leading power company for ships. Major breakthroughs have been made in such business markets as gas power, marine nuclear power, and all-electric power. Institutional analysis believes that China’s huge domestic demand for gas-powered alternative space, as well as space for nuclear and all-electricity power markets, is expected to become the company’s new growth pole in the future. The company implemented equity incentives at the beginning of the year, and the performance growth index was about 15% from 2018 to 2020, which is conducive to ensuring the consistency of management and shareholders' interests, stimulating growth dynamism and helping the company to achieve sustainable development.
Highland Letter (300065)
The company's business is divided into three categories: smart navigation, ocean information services, and marine monitoring. Institutional analysis pointed out that the company is a scarce marine information company in China. At present, the company is actively developing small-target radar business. The construction of offshore radar monitoring network is rapidly advancing and continues to contribute profits. Under the background of the “Strong Strategy for Marine Powers” of the country, investment in the field of submarine monitoring will also increase substantially, and the company will face historic opportunities.
China Aviation Photoelectric (002179)
The company is a major supplier of domestic military aviation connectors. According to institutional analysis, the company benefited from the accelerated progress of domestic large-scale passenger aircraft + high-end domestic military aircraft. In addition, the growth rate of aircraft integrated ancillaries business is expected to increase further. On the civilian side, the company's downstream mainly electric vehicles will fully benefit from the domestic electric vehicle market. Sustained high growth; new business such as liquid-cooled + high-speed connectors will gradually realize industrialization, and will bring incremental performance to the company; after implementation of equity incentives, there will be clear goals for growth in company performance based on the unlocking conditions, and employee enthusiasm will be significantly improved.
The Galaxy Flower Research report pointed out that there is strong fundamentals and policy support behind this round of military advancement. In terms of fundamentals, the order repair logic is gradually verified with the arrival of orders for military products such as Hager Communications, Kangda New Materials (002269), and Starnet Muda (002829), as well as the higher growth of associated transactions in the China Aviation Department. On the policy front, the merger of the two ships warmed up, and the reform of the military procurement and pricing mechanism entered the annual promotion goal. The gradual release of the policy dividend is expected to significantly increase the investment risk appetite for the sector. Flower offerings Kanda new material (002269), cultural interpretation of cultural flowers under interpretation? How did Smith Barney enter the military sector?
Inject missile launch assets expected, vehicle networking, sensors, industrial Internet, aerospace three homes the only listed platform, Beidou navigation, aerospace science and technology 000901 will send high? 31 yuan broke through 38%!
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The price-earnings ratio is only 24 times the 32 East China Computer, will it be a total of seven listed platforms?
“Currently, China Electronics has established the China National Electric Instrument and Instrument Co., Ltd. (“CLP Instruments”) with 40 centers and 41 centers as its core. It established China with 30 centers and 33 centers as its core. Electronic Technology Network Information Security Co., Ltd. (abbreviated as "China Net Security"), has established seven companies, thirty-four, thirty-nine, fifty, fifty-four, etc. The Communications Division established the Zhongdian Science and Technology Group Chongqing Acoustic Optoelectronics Co., Ltd. with 24, 26, and 44 centers as cores. The joint ten, twenty, forty-one, and fifty Four, twenty-eight, fourteen, and thirty-two were jointly established with Sichuan Province and Chengdu City by CEC Aviation Electronics Co., Ltd. (abbreviated as “Electrical Division Avionics”), established by relying on 58 institutions. Kexin IC Co., Ltd. etc."
It seems that you are afraid of being shipped out of the stock market.
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April 13 Research Newsletter
Affected by geopolitical risks, global market volatility has continued to decline overall this week. A-shares have not been spared from wide-range shocks, and gold and silver assets of hedge funds have performed well. This year’s conference call experts focused on this analysis. The intellectual copyright of the Boao Forum was also analyzed. In the company research, we discovered three very individual companies, which came from three very special industries. Let's take a quick look at today's stocks and ratings:
1. West China Co., Ltd.: Which venture capitalist is best? The world's first Huaxi village Moore rating A+
2. Zhifei Bio: HPV vaccine has become explosive. Supply exceeds continuous increase. Moore rating A+
3. Xinyu Guoke: A pyrotechnic equipment alone is a major customer and its mystery is Moore Rating A
In order to implement the national "13th Five-Year Plan" "Outline" and accelerate the major deployment of "Internet +" actions, artificial intelligence development planning, and digital economic development, the National Development and Reform Commission organized and implemented "Internet Plus" and artificial intelligence innovation in 2018. Development and digital economy pilot major projects. After review, 56 projects including 55 units including Huawei, Alibaba Cloud, Jingdong, Baidu and the Cambrian were successfully approved. The industrialization and application of high-sensitivity speech recognition system of HKUST News Communication Co., Ltd. and HKUST Guochuang Software Co., Ltd. The "Anhui Provincial Credit Big Data Platform Construction Project" of the company is listed among them.