China's total military trade volume is low, the proportion of export income of military enterprises is small, and China's military trade market is ushering in opportunities under the uncertain world situation. From 2000 to 2023, China's military exports accounted for a significant growth trend in the global market, rising to 8.4% in 2023, but less than the 38.8% of the United States. Represented by listed companies in Shenwan's national defense and military industry, the proportion of domestic revenue of China's military enterprises from 2016 to 2023 has remained at 80%-90% for a long time, and the proportion of revenue from exports will be only 15% in 2023, and the proportion of military trade income is small; At the same time, since the conflict between Russia and Ukraine, the export volume of Russia, the main exporter of military trade, has decreased significantly, and the gap in the supply side of military trade has brought new development opportunities to China.

China's military trade products are in full bloom, and a variety of new equipment is expected to be used in military trade in the future. From 2010 to 2023, China's UAV model exports are mainly Chada UAVs, mainly Pterodactyl and Rainbow series, of which Pterodactyl-2 and Rainbow-4 series have been exported more since 2018; The export of military aircraft models is mainly JF-17 Thunder, K-8 and J-10C series; The main models of Yuanhuo military trade are SH-15, WS-22 and SM-4; The main models of missiles for military trade are anti-missile systems HQ-9, HQ-22 and C-802A. At the same time, radar technology is also at the international advanced level, in recent years, the main models YLC-18, SLC-2 are 14 Guorui technology products of CETC. In recent years, China's equipment has made comprehensive progress in terms of technical performance, reliability, intelligence level and manufacturing process through continuous upgrading. Compared with the past, the new generation of equipment has achieved significant improvements in combat capability, adaptability, and economy, and can better meet diversified combat needs. From an international point of view, China's arms trade equipment has gradually narrowed the gap with the international advanced level represented by the United States, and has shown stronger and stronger market competitiveness.

Lockheed Martin's history proves that the arms trade is the driving force for business growth. Lockheed Martin ranks first in the global military industry in terms of revenue, and in order to cope with the decline in domestic revenue, it has increased its investment in overseas business since 2013 to ensure revenue growth, mainly through mergers and acquisitions, factories, and subsidiaries. The company has established branches or direct subsidiaries in Saudi Arabia, the United Arab Emirates, Israel, Qatar and other regions in the Middle East, and at the same time acquired Amor Group, Sikorsky and increased its holdings in AWE to develop overseas business. Since 2014, the proportion of overseas revenue has remained above 22% for a long time, and the growth trend has been maintained, with a CAGR of 8.5% from 2013 to 2023. The case of Lockheed Martin is a reference for domestic military enterprises, the sales price of foreign trade orders is mostly higher than the domestic government procurement price, and the growth of revenue may bring huge profits, and the recent intensification of geopolitical turmoil is expected to continue to promote the overseas income of military enterprises.

In 2025, the uncertainty of the world pattern will continue, and geopolitical conflicts may continue. With the continuous upgrading of technology, the cost performance of China's military products has been highlighted, more foreign trade models are expected to enter the overseas market, the overall military trade market growth space is large, radar, tanks, unmanned aerial vehicles, military aircraft, long-range fire, missiles and other industries supporting military trade companies can be expected to increase in the future.

In terms of radar, it is recommended to pay attention to: Guorui Technology (600562, not rated), Aerospace Nanhu (688552, not rated), etc.;

In terms of tanks, it is recommended to pay attention to: Inner Mongolia one machine (600967, not rated); In terms of UAVs, it is recommended to pay attention to: medium UAVs (688297, not rated), Aerospace Rainbow (002389, not rated), Aerospace Electronics (600879, not rated), etc.;

In terms of military aircraft, it is recommended to pay attention to: AVIC Shenfei (600760, not rated), AVIC Xifei (000768, not rated), AVIC Chengfei (302132, not rated), Hongdu Airlines (600316, not rated), Hangfa Power (600893, not rated), Leejun (002651, not rated), AVIC Airborne (600372, overweight), etc.; In terms of long-range fire and missiles, it is recommended to pay attention to: National Science and Military Industry (688543, not rated), Zhongbing Red Arrow (000519, not rated), Northern Navigation (600435, not rated), etc.

Risk Warning:

Foreign trade orders and revenue recognition are less than expected, R&D progress and industrialization are less than expected, product price decline risk, calculation error risk, etc.