Analysis of the military industry chain and fund investment
The military industry has the dual attributes of national defense and economic construction, and military stocks are certainty high growth stocks. Currently on the market military index fund tracked by the military index is concentrated in the CSI military, CSI defense, military index, as well as the national securities military. Today I will share with you to analyze the military industry chain and investment, for your reference only!
Military industry chain
Military industry enterprises in accordance with the order of the industry chain can be roughly divided into upstream materials and components suppliers and stand-alone, module manufacturers, midstream sub-systems (large components) subcontractors, downstream general assembly (the whole aircraft or core system) contractors.
1, upstream components and new materials, such as various types of metal, organic and composite materials and other raw materials, as well as equipment, components and parts that make up the system;
2, midstream core systems, such as radar systems, communication systems, weapons systems, electromechanical systems, etc.;
3, downstream general assembly, including aviation, space, ships, land forces and other areas of the main battle equipment Overall design, production.
Military Product Classification
Currently, there are six major categories in the basic classification of China's military industry, namely: nuclear industry, aviation industry, aerospace industry, shipbuilding industry, weapons industry, electronic information, which are six major categories. Corresponding to the top ten military industrial groups are as follows:
1. Nuclear industry
Involved in geological exploration, mining, metallurgy, chemical industry, electric power, machinery manufacturing, construction, electrical machinery and precision instrumentation and other industrial sectors and physics, chemistry, electronics, semiconductors, computational technology, automation, materials science, heat transfer, medicine and biology and other disciplinary fields. The level of development of a country's nuclear industry can centrally reflect the country's entire industrial base and the level of science and technology. Main products: nuclear raw materials, nuclear fuel, nuclear power plant, nuclear weapons (including atomic bombs, hydrogen bombs and neutron bombs), nuclear power, applied nuclear technology.
The nuclear industry includes the China National Nuclear Corporation (CNNC), and the main listed companies are China National Nuclear Science and Technology (CNST), China National Nuclear Power (CNP), and China National Nuclear Construction (CNNC).
2. Aviation industry:
An industry that combines military and civilian industries in the development, production and repair of aircraft. It involves metallurgy and chemical industry, advanced materials, electronic information, new energy, infrastructure construction, personnel training, financial services and other fields, and is an important foundation for building an independent and consolidated national defense. It usually includes a wide range of products such as aviation vehicles, power units, airborne equipment, airborne weapons and other manufacturing and repair industries. Main products: military airplanes, helicopters, aviation engines, fighter jets, unmanned aerial vehicles, flying machines, airships and so on.
Aeronautical department includes aviation industry, China aviation development group, the main listed companies are AVIC west flight, AVIC mechanical and electrical, aviation development power, aviation development science and technology.
3. Aerospace industry:
Industry engaged in the development and production of spacecraft, space vehicles, and the equipment they carry and ground support equipment, is an important part of the national defense science and technology industry, and one of the military-civilian combination of high-tech industries, is a symbol of the comprehensive national strength. It involves the fields of electronics, computers, metallurgy, materials, machinery, special craft, cryogenic and vacuum technology, testing, control, measurement and control, meteorology, shipping, biology, agriculture and so on. Main products: including rockets, missiles, satellite launches, manned spacecraft and so on.
The Aerospace Department includes Aerospace Science and Technology Group and Aerospace Science and Industry Group, and the main listed companies are China Satellite, Aerospace Electric, Aerospace Changfeng and Aerospace Science and Technology.
Industry chain upstream: aerospace its manufacturing to provide raw materials and equipment, including: special materials, electronic components, communications equipment, instrumentation and other components and auxiliary software;
Industry chain in the middle of the process: spacecraft manufacturing, space-related equipment manufacturing;
Industry chain downstream: mainly including the national defense construction, satellite applications industry.
4. Shipbuilding industry:
The heavy industry that undertakes the design, construction, maintenance and testing of various military and civilian ships and other floating tools as well as the production of their ancillary equipment has an irreplaceable and huge role in ensuring the country's national defense and security and in promoting the development of China's transportation industry, marine development industry and other important sectors of the national economy. It involves key industries such as iron and steel, petrochemical, light industry, textile, equipment manufacturing, electronic information and so on. Main products: aircraft carriers and their carrier aircraft and ship group, all kinds of military and civilian surface ships, underwater vessels.
Shipbuilding department includes China Shipbuilding Group, the main listed companies are China Shipbuilding Defense, China Shipbuilding, China Shipbuilding Science and Technology.
5. Weapons industry:
It involves electronic information, metallurgy, chemical industry, electric power, machinery, precision instrumentation and other fields. Main products: tanks and armored vehicles, artillery, missiles, shells, bullets, bombs, aerial bombs, depth charges, fuzes, pyrotechnics, fire explosives, propellants, combat parts, fire control and command equipment, man-portable weapons, night-vision equipment and so on.
The weapons department includes China National Military Industry Corporation (CNMC) and China National Military Equipment Corporation (CNMEC), and the main listed companies are North International, North Navigation, Inner Mongolia First Machine, Changan Automobile, Jiangling Automobile, and COFCO Capital.
6. Electronic information:
Electronic information is in the context of the rapid development of computer technology, communications technology and high-density storage technology and widely used in various fields has become the vocabulary of informatics. Mainly engaged in national important military and civilian use of large-scale electronic information system engineering and construction, major equipment, communications and electronic equipment, software and key components development and production. Involved in the military, government informatization field, public **** security field, air traffic field, satellite applications, core software products and services, integrated circuit core equipment field, energy electronics field. Main products: military navigation, communication, detection, radar, sensing, mapping, instrumentation, sonar, and other software services.
The electronics department includes CEC and China Electronics Group, and the main listed companies are Taiji Group, Hikvision, Weishitong, Shanghai Beiling, Zhenhua Science and Technology, the Great Wall of China, and China Software.
Valuation analysis of the military industry
Doing as a high-end manufacturing industry, you can use commonly used valuation methods for valuation, such as absolute valuation method (DDM, DCF) and relative valuation method (PE, PB, PS, PEG, EV/EBITDA) and other methods of valuation. Military industry is generally high PE, which in addition to the high growth of military stocks, there are a variety of reasons such as potential asset injection, therefore, in the valuation of military stocks, you can be a point in time in the future, the potential for asset injection may be measured, calculate the new EPS, and then PE valuation, or you can use market value valuation method, reference to the international benchmark enterprise benchmark market value for valuation.
Military industry investment method
1, value investment method: mining military industry high-growth low valuation companies, using the buy and hold strategy for long-term investment.
2, event-driven method: geopolitical conflicts, such as the South China Sea conflict, China-Japan East China Sea conflict, etc.; equipment outbreaks, aircraft carrier launch, four generations of aircraft, drive, satellite launch, etc.; listed companies, asset reorganization, directional issuance, large orders, etc.
3, the theme of the investment method: the military industry of a few themes in accordance with the valuation level and the market sentiment of the stage of the low suction and high throw.
4, portfolio quantitative method: the use of portfolio allocation, quantitative analysis of the perspective, through data analysis and brush selection for decentralized allocation.
It is not difficult to see that there are many military sub-sectors, high technical expertise, and driven by external events, has a strong theme investment color. Ordinary investors can borrow the fund layout.
Bosch military theme stock fund manager Ran Qiao believes that the military industry's earnings elasticity, subject to market fluctuations. From a fundamental point of view, the military industry in the next few years, strong growth, some of the texture of the military enterprise market value of good growth space, still optimistic about the performance of the military industry in the next 2-3 years.
Wanting to participate in the investment opportunities of the big military industry, you may want to choose to fund fixed investment to adhere to the long-term investment, and strive to smooth the return curve.
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