Investment highlights: Event: On July 7, the English-language national newspaper “China Daily” used a full-page article to discuss the situation where China may be developing a new long-range bomber, which may cost 105 billion US dollars over the next 15 years. Comment: Long-range strategic bombers are at the pole of the nuclear trinity. They are also a shortcoming in the combat capability of our military. They need to be developed urgently, benefiting large aircraft and engine manufacturers. The white paper “China's Military Strategy” clearly states that the air force strategy should shift from a territorial air defense type to a combination of attack and defense. We believe that the development of long-range strategic bombers is an inevitable direction for the development of air force equipment. Earlier, Hanhe Defense reported that China's development of long-range strategic bombers will use the new turbofan-18 aero engine, which will greatly benefit China's aircraft manufacturers and aero engine manufacturers. China's demand for aero engines in 20 years is nearly 3 trillion yuan. Demand for military use is growing explosively, and the space for civilian use is even wider. In the context of a comprehensive upgrade of China's military strategy, demand for military aero engines is showing explosive growth. We expect the demand for the next 20 years to be about 300 billion yuan, and the demand for supporting services is about 500 billion yuan. Considering the future demand for civil aero engines, the total demand for the next 20 years is close to 3 trillion yuan. The aero engine project is expected to be supported beyond expectations. The company is small in size, and the benefits will be greatest in the future. Developed countries are all investing huge sums of money in aero-engine research and development. China's two-aircraft project of over 100 billion dollars is expected to be introduced, and we estimate that the investment scale is expected to reach 300 billion yuan. Among the listed companies in the engine industry, the company is the smallest in size, and it should be a probable event that it receives a subsidy equal to or even higher in proportion to its size. The promotion effect of the project will be significant compared to other engine sector companies, and the company is expected to become the biggest beneficiary target of the project. The aero engine business is expected to experience explosive growth, and has the potential to become an important supplement to China's overall engine production capacity. The company's complete engine products are in the process of replacing old and new models, and new models are being developed rapidly. Demand for aero engines is exploding, driven by major projects in major aircraft countries and the strategic transformation needs of the air force. As one of the major engine manufacturers in China, the company is expected to become an important supplement to China's military aero engine production capacity. The demand for aero engines in the civilian sector is even greater, and the company's growth prospects are extremely broad. Compared to the other two companies in the engine sector, the market capitalization is seriously underestimated, and the flexibility is huge. There are three listed companies in the AVIC engine sector, with a market value of 66.8 billion yuan for Aerodynamics and a market value of 24.4 billion yuan for AVIC Control. We believe that as a potential important supplement to China's complete engine production capacity and the biggest beneficiary of the project in the future, the company's market capitalization of only 12.4 billion dollars is still clearly underestimated, and there is still huge room for market capitalization to grow. Earnings forecasts and ratings. The company's 2015-16 EPS is expected to be 0.32 or 0.53 yuan, and the corresponding sales volume per share in 2015 is 7.97 yuan. We judge that the company will be the most flexible type in the aero engine sector in the future, and the company announced on July 10 that management will increase its holdings by a total of 13,000 shares, demonstrating confidence, maintaining a six-month target price of 100 yuan, corresponding to the 12.5 times PS valuation, reaffirming our firm optimism and maintaining the “buy” rating. Risk warning. (1) Military orders have fluctuated greatly. (2) New product development and mass production are later than expected. (3) The world economy continues to decline, and the growth of foreign trade aviation business falls short of expectations. (4) Relevant policies were announced later than expected.