Yesterday, the stocks in the military industry sector rose or fell. Among them, Yonggui Electric Appliances, Zhongbing Hongjian, and Zhongxin Haizhi stocks rose significantly. It is worth noting that the military sector, which has been underperforming for a long time in the past, has risen more than 20% since it rebounded from the broader market in mid-February this year, ranking among the top gainers.
In this regard, market participants said that fundamentals and news surface resonance, overlapping market risk appetite and valuation systems are switching: the new unicorns in the new economy, high-tech areas began to value revaluation, with representatives in the military sector Sexual fighter jets, helicopters, armored vehicles, and other companies have high barriers, high technology, and high monopoly characteristics, and their values have begun to be recognized by the market. Three factors caused the recent rise in the military sector.
In the past two years, in addition to the high valuation factors, the fundamental deterioration has been caused by the following: First, the delay in orders for military products brought about by military reform; Second, the stagnation of military asset securitization in 2017, resulting in a difficult trend in the military sector during the period. Quote: Shenwan’s defense industry index fell by 19% in 2016, ranking fifth in the 28 SWFs in the industry; SWD’s defense industry index fell by 17% in 2017, ranking the penultimate sector in 28 SWS. four.
Some brokerages believe that the fundamentals of the industry have reached a freezing point in 2017, and gradual improvement in the future is a high probability event. On the one hand, the phased impact of military reform gradually weakens, and military orders growth will re-accelerate. Positive phenomena have recently emerged. For example, the entire aircraft manufacturer Shenqi Shenfei’s 2017 earnings of 706 million yuan significantly exceeded market expectations, and information equipment suppliers Hager Communications Military orders continued to land. Looking at the expansion of military weapons and equipment procurement practices and the restructuring system, the order growth of military-industrial enterprises in the next three years will be sustained. It is expected that military orders will increase significantly in 2018, especially in areas where new models are released.
On the other hand, staged stagnation of asset securitization does not mean stoppage. After AVIC Shenfei completed its assets reorganization and listing, it was evaluated on the SASAC website as "It is aviation industry that deepens civil-military integration, mixed economic ownership reform, and core military asset securitization. "An active exploration" and passing a positive affirmative attitude, the asset securitization of military assets is still the trend of the industry.
It can be seen that since 2017, major military-industrial groups have restructured one by one, and all state-owned enterprises have been transformed into wholly state-owned companies. The name of the company has changed from “XX Group Company” to “XX Group Co., Ltd.” and the ownership and decision-making power of the company after restructuring Separation of management rights, more clearly defined powers and responsibilities, this may be to pave the way for subsequent mixed changes and other actions.
Long-term investment opportunities
Because of the special labels of the military industry—“high valuation”, “low growth performance and poor stability”, “large volatility” and “subject concept”, some investors chose to evade it. However, on the other hand, the stocks such as AVIC Aircraft, AVIC Electromechanical, and Zhongzhi Co., Ltd. have rebounded from the bottom since the rebound in volume and price, and there has been no sign of peaking. The conflict between cognition and phenomena makes investors confused about the configuration of the military sector.
Shen Wanhongyuan analyst pointed out that the mid- and long-term basic aspects of the military sector are good, and the short-term sentiment catalysed a rebound. In the future, it is expected that the leading stocks will drive out the medium and long-term market. 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 concept 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.
Optimistic about investment opportunities in military aircrafts, tanks, infantry fighting vehicles, and helicopters. It is recommended that there be a margin of safety, with emphasis on recommending both growth and valuation, or growth to identify low or scarce varieties.
Military Theme Fund
|Fund code||Fund abbreviation||Near-month earnings||Fees||operating|
|001266||SDIC UBS Lucky Mix||13.29%||1.50% 0.15%||buy Open an account to buy|
|002251||China Military Security Mix||11.42%||1.50% 0.15%||buy Open an account to buy|
|001679||Qianhai Open Source China Scarcity Asset Mix A||11.13%||1.50% 0.15%||buy Open an account to buy|
|000800||Chinese Business Future Blend||8.46%||1.50% 0.15%||buy Open an account to buy|
|002983||Long letter Defence Military Quantitative Mix||7.59%||1.50% 0.15%||buy Open an account to buy|
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