From |Daily Finance News
By |Liu Yang
At the end of the year, all kinds of strategy meetings are endless, and recently attended a more authoritative conference, a well-known chief analyst of the military industry, pointed out in his speech that the military industry has really entered the era of performance-driven stock prices, and the current opportunities in the military industry are not seen in more than a decade of his career.
In fact, institutional funds have long been involved in the third quarter is also accelerating the inflow, as of the end of the third quarter of 2020, public funds military position total market value of 72.740 billion yuan, compared to the end of the second quarter of 2020 a substantial increase of 124.18%, the total market value of the holdings of 41,570,111 million yuan, the military stocks position accounted for 1.75%, compared to two quarters 0.97% of the position accounted for another 0.78 percentage points.
Many factors superimposed on the speed of defense construction is the trend
From 1999-2020, the 20-year period, the global defense budget as a whole showed a sustained upward trend, but the middle of the impact of the economic development of the growth rate of the downturn. 2009 growth rate of 7.12% of the highest point since the 2010, by the global economic crisis and the decline in the growth rate. In 2009, the growth rate reached a peak of 7.12%, and since 2010, due to the impact of the global economic crisis, the momentum of the rapid growth of the global defense budget has been suppressed.
From 2011 to 2014, the total global defense budget has been in a downward trend, in which the total global defense budget in 2014 fell to $1,746 billion, basically flat compared to 2013, the downward trend appeared to ease. 2015, the total global defense budget rebounded year-on-year to reach $1,760 billion, a year-on-year increase of about 1.37%, to achieve the first growth since 2011. 2011. Since 2017, the growth rate of the total global defense budget has begun to pick up sharply, and according to the latest SIPRI 2020 data, the total global defense budget in 2019 will be $1,917 billion, reaching the highest budget level since 1988, and an increase of about 3.6% from 2018.
The United States, as the world's top country in terms of absolute defense spending, has a combined defense budget of $1,553 billion in 2019, accounting for 81% of the world's total, and is influencing the direction of global military spending in terms of its own high military spending growth and its impact on the military budgets of its allies. In contrast, China's military spending has shown a high rate of growth, with 1,189.9 billion yuan of defense spending in 2019, still maintaining a growth rate of 7.5%, and a significant increase of 85% over the past decade.
In fact, behind the high-speed growth is repaying the debt owed in the early period, because the center of China's development in the early period was economic construction, so the construction of national defense was neglected in the 1980s and 1990s, China's military expenditure in 2018 accounted for only 1.8% of GDP, not only far lower than the United States of America's 3.2%, but also lower than India's 2.4%, Vietnam's 2.3%, South Korea's 2.6%, and Turkey's 2.5%.
In recent years, under the background of increasingly complex international forms, the maintenance of national security has been mentioned a new height, at the same time, a strong comprehensive strength is the foundation of national defense construction, as the saying goes: "a cannon, gold ten thousand taels," without a strong economic foundation is difficult to build a strong army. After decades of reform and opening up, China has become the world's largest manufacturing country, whether it is the size of the economic volume or the speed of economic development is the best, which is vigorously develop the military industry where the bottom line is.
The policy has been clearly set, the military industry will also accelerate its development in the future. 2019, China released "China's National Defense in the New Era", which said: the strategic goal of China's national defense and military construction in the new era is to basically realize mechanization by 2020, and make significant progress in the construction of information technology. It strives to basically realize the modernization of the national defense and army by 2035, and fully build the people's army into a world-class army by the middle of this century.
The 14th Five-Year Plan communiqué once again reiterated that China will accelerate the modernization of its national defense and army, strengthen its military training and preparation for war, improve its strategic ability to defend the country's sovereignty, security, and development interests, and ensure that it achieves the goal of a century of army building by 2027. It is worth noting that these references are the first time.
"14th Five-Year Plan" is a period of reform dividend release
"13th Five-Year Plan" period, the army focused on three reforms, namely: the army establishment system reform, the military product pricing mechanism reform, and military representation system reform. The reform began at the end of 2016 and continued until the third quarter of 2019. During the reform period, due to important changes in the adjustment of the military procurement organs, the adjustment of the military procurement catalog, and the adjustment of the product acceptance system, a lot of orders were not released, resulting in the performance of the military industrial enterprises throughout the 13th Five-Year Plan period, and not much improvement.
But after entering 2020, with the successful completion of the reform, superimposed on the acceleration of national defense construction, the military industry orders pouring out, the data show that the military industry plate performance in the first three quarters to achieve rapid growth, the industry boom continued to improve.
95 related companies *** to achieve operating income of 318.812 billion yuan, an increase of 14.98%, to achieve net profit of 22.016 billion yuan, an increase of 51.00%, excluding the impact of China Shipbuilding Defense sell equity gains of more than 3.3 billion yuan, to achieve net profit of 18.716 billion yuan, an increase of 26.04%.
Expanded to see, to the aviation host industry chain, aviation new materials enterprises, missile products supporting enterprises, aviation engine industry chain enterprises performance growth is the most prominent. Downstream host plant in the AeroDynamics, AVIC Shenfei to achieve more than expected growth, respectively, to achieve revenue of 15.468 billion, 18.910 billion, an increase of 20.90%, 19.01% year-on-year, net profit of 413 million, 1.162 billion, an increase of 45.46%, +86.66% year-on-year; the most significant growth in the midstream is the AILO, to achieve revenue of 185 million (91.62%), the mother of the net profit, a year-on-year growth of 45.46%, 86.66%. 91.62%), net profit of 0.89 billion (+99.84%), the most significant growth in the upstream is Ruichuang micro-nano, to achieve revenue of 1.078 billion (167.89%), net profit of 465 million (+359.59%).
Previously mentioned the reform of the military system, a careful study will find that the military reform of the military industry has played a very large role in promoting the military industry, including the reform of military pricing mechanism for the largest impact on business performance. Through the reform of the supply chain management authority, to give the general assembly and major subsystems enterprise industry chain management authority, the new product to release the old 5% cost markup mechanism of the bondage, drive profits to the general assembly enterprises and high-tech enterprises flow. For products classified as military procurement of civilian products, the use of socialized bidding to avoid wasting procurement funds on shelf products with low technological content.
The new pricing mechanism for military products can maximize the incentives for general assembly enterprises and high-tech enterprises to carry out technological innovation to improve the level of net interest rates. Before this, the level of profit margins in the military industry has been suppressed for a long time. As an example, the net profit margin of AVIC Shenfei, the leading manufacturer of domestic fighter jets, was 3.6% in 2016, and the figure for 2019 is 3.7%, which is not only very low, but also almost stagnant. In comparison, the average net interest rates of Boeing, Airbus, Loma, and Raytheon in the same industry were 7.42%, 3.69%, 8.75%, and 9.75%, respectively, in 2015-2019. One of the major reasons for this phenomenon is the previous cost-plus pricing mechanism. With the pricing model from the "cost-plus method" to "target price method" change, AVIC Shenfei's profit margins are expected to be further opened up, the formation of "volume and price" situation, the industry is the same for other enterprises. Other enterprises in the industry is the same situation.
Into the "14th Five-Year Plan" period, the military industry not only to complete the "13th Five-Year Plan" period due to the reform and did not complete the production tasks, but also to complete the "14th Five-Year Plan" period of new purchase orders. The military industry has to fulfill the production tasks that were not completed during the 13th Five-Year Plan due to the reform, and also fulfill the new purchase orders issued during the 14th Five-Year Plan. In other words, in less than six years from 2020, the military industry will have to fulfill about nine years' worth of tasks. At the same time, compared to the previous, the speed of national defense construction is also accelerating, then the number of orders within the same period of time will inevitably increase, the superposition of the two factors **** invigorated, military industry ushered in ten years has not been a great opportunity is not an exaggeration.