The Zhitong Finance App learned that Cinda Securities released a research report saying that the 2024 military market is interpreted and predicted: 1) Back to back high, and the difficult situation is reversed. Military white horses and core track leaders are expected to take the lead in recovering performance and valuation: looking forward to 2024. It is expected that with mid-range implementation, new model release, and industrialized application of new technology, core tracks such as aviation and aerospace (missiles) are expected to usher in improved orders and accelerated performance. 2) New quality highlights are constantly emerging: 2024 is expected to be a key year for the launch of large C919 domestic aircraft, accelerated deployment of satellite internet, intensive commercial rocket launches, industrial development of 3D printing, electronic confrontation, and accelerated development of underwater attacks and defense.

▍ The main views of Cinda Securities are as follows:

Today, major changes that have not occurred in the world in 100 years are evolving at an accelerated pace. The new round of technological and military revolution is changing rapidly, continuously driving the long-term growth of the military industry.

1) The power game intensified, and the external environment changed dramatically: the Israel-Palestine conflict broke out in 2023, the Russian-Ukrainian conflict continued, and the US raided Syria to accelerate the evolution of the new geopolitical landscape.

2) Countries around the world may enter a cycle of high military spending: the total defense budget of the United States for the 2024 fiscal year was 842 billion US dollars (+3.2%), and Japan's 2024 defense budget reached 7.7 trillion yen, all of which are the highest levels in history.

3) The “equipment cycle+personnel cycle” resonates to start new growth: the military industry is mainly affected by the equipment cycle and personnel cycle. From the beginning of 2023 to December 7, the military sector fell 9%, ranking 21/29, with a significant pullback, but 2024-2025 will enter the second two years of the 14th Five-Year Plan. It is expected that the military industry will usher in a new boom, new opportunities, and start new growth.

Shou Deyun sees Yueming, interprets and predicts the 2024 military industry market:

1) High back and forth, reversal of the predicament. Military White Horse and core track leaders are expected to take the lead in both performance and valuation recovery: looking forward to 2024. It is expected that with the launch of mid-range adjustments, the release of new models, and the industrialization of new technology, core tracks such as aviation and aerospace (missiles) are expected to improve orders and accelerate performance.

2) New quality highlights in the new domain are constantly emerging: 2024 is expected to be a key year for the launch of large C919 domestic aircraft, accelerated deployment of satellite internet, intensive commercial rocket launches, industrial development of 3D printing, electronic confrontation, and accelerated underwater attack and defense.

Focus on the three main lines of investment:

1) Aero engines: the release of new equipment and the upgrading of old equipment. At present, the entire industry chain has a high investment cost ratio from upstream high temperature alloys, titanium alloys, and stealth new materials to midstream forging and casting to aviation engine plants.

2) Focus on the “20 Series” military aircraft installation and focus on the C919 large domestic aircraft: China's military aircraft have fully entered the “20” era, but there is still a significant gap compared to the US, and they may continue to be upgraded in the future. Meanwhile, the large domestic aircraft represented by the C919 may enter the mass production and delivery stage, which is expected to leverage the new trillion dollar market.

3) Missiles+long-range fire: the “killer weapon” of modern warfare. The US defense budget for the 2024 fiscal year plans to purchase missiles and ammunition at 30.6 billion US dollars. As our military carries out practical exercises and exercises, missiles may usher in strong demand for equipment.

Follow the three new domain new quality tracks:

1) Satellite: Satellite Internet+Beidou3+ remote sensing are expected to go hand in hand. With the construction of low-orbit satellite internet, the industrial application of the “North 3”, and the commercial operation of remote sensing satellites, China's satellite industry may welcome a golden period of development.

2) 3D printing: From aerospace to 3C consumer electronics, commercial aerospace, etc., it has broad application prospects. Disruptive technology has entered a new stage of industrialization development, downstream market expansion+penetration rate continues to increase, and market space is expected to continue to open up.

3) Drones: A new force in future wars, an important force in intelligent combat systems. In the Russian-Ukrainian conflict, drones are at the center of the modern war stage, and they are also expected to become one of the main directions for the development of air force equipment in various countries in the future.

Stock selection ideas and targets that are expected to benefit: Focus on “core leader+new domain quality” and find strong alpha varieties from the three dimensions of “prosperity, certainty, and market space”. It is recommended to focus on:

1) Core leaders in the aviation aviation development industry chain: China Aviation Heavy Equipment (600765.SH), etc. 2) Missile industry chain: aerospace appliances (002025.SZ), etc. 3) Inspection and testing: Soviet test (300416.SZ), etc. 4) Satellite industry: Aerospace Hongtu (688066.SH), etc. 5) 3D printing: Platinum (688333.SH), etc. 6) Drones: medium drones (688297.SH), etc.

Risk warning:

Defense spending fell short of expectations; new weapons and equipment were being deployed less quickly than expected.