On March 8th, CITIC Securities believes that China’s defense budget will maintain steady growth. European defense spending raises 800 billion euros, geopolitical uncertainty intensifies, and world military spending and trade may continue to grow. After the conflict between Russia-Ukraine conflict, the number of Russian arms exports, one of the five largest arms exporters in the world, declined significantly. At present, China’s military trade has established a product system with complete structure, complete system, advanced technology, excellent performance and reliable quality. While domestic demand remains strong, the international military trade market may become the second growth curve for China’s military industry. In terms of configuration, CITIC Securities suggests focusing on three investment themes. Firstly, in the traditional military industry direction, it is recommended to focus on the aviation and shipbuilding industries, as well as the aerospace industry, which have expected order repair and performance support; The second is the direction of new domains and new qualities. In terms of new warfare, it is recommended to focus on industries with the three characteristics of low cost, intelligence, and systematization, including low-cost precision guided ammunition, unmanned systems, and new generation intelligent combat bases; In terms of new quality productivity, it is recommended to focus on industries with broad application market space, rapid growth period, and low localization rate, mainly commercial aerospace, low altitude economy, and large aircraft; In terms of new technologies, it is recommended to focus on MEMS devices, additive manufacturing, and ceramic based composite materials. The third is to reform the direction of going global, and it is recommended to pay attention to relevant companies with expected asset integration and competitive military trade markets.
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