According to Zhitong Finance APP, Zhongyou Securities has released research reports stating that the development of low-altitude economic formats such as drone urban flight and eVTOL has entered the pilot stage. After rapid growth from 2020 to 2022, the military industry has shown significant performance differences in its sub-sectors in 2023, with increasing structural differentiation, and is expected to usher in high-quality development in the future. With the continuous advancement of equipment technology and the emergence of new technologies and products, there may be many investment opportunities in the new domain of new-type combat.

Event: On November 18, Sun Weiguo, director of the General Aviation Business Department and the Drone Working Committee of the China Air Transport Association, revealed at the 2024 International Electric Aviation (Kunshan) Forum that the Central Air Traffic Control Commission will soon conduct eVTOL pilots in six cities. The six pilot cities have been preliminarily identified as Hefei, Hangzhou, Shenzhen, Suzhou, Chengdu, and Chongqing. The pilot documents have relevant plans for routes and areas, and authorize some local governments for airspace below 600 meters.

The main opinions of Zhongyou Securities are as follows:

The development of low-altitude economic formats such as drone urban flight and eVTOL has entered the pilot stage.

On November 5, Colonel Fang Qiyong of the Air Force Headquarters stated that the Air Force and civil aviation departments will support low-altitude reforms in five provinces: Sichuan, Hainan, Hunan, Anhui, and Jiangxi, as well as the pilot of drone urban flight in Shenzhen. On November 18, Sun Weiguo, director of the General Aviation Business Department and the Drone Working Committee of the China Air Transport Association, revealed at the 2024 International Electric Aviation (Kunshan) Forum that the Central Air Traffic Control Commission will soon conduct eVTOL pilots in six cities. The development of low-altitude economic formats such as drone urban flight and eVTOL has entered the pilot stage.

Related symbols of the low-altitude economy industry include:

1) Low-altitude infrastructure related symbols such as Lais Information (688631.SH), Geovis Technology Co., Ltd. (688568.SH), Shenzhen Urban Transportation (301091.SZ), Sichuan Jiuzhou Electric (000801.SZ), Glarun Technology (600562.SH), Narui Radar (688522.SH), Guangdong Kingstrong Technology (300629.SZ), Sun Create Electronics (600990.SH), Aerospace South Lake (688552.SH), Guangzhou Haige Communications Group Incorporated (002465.SZ), and Tellhow Sci-Tech (600590.SH);

2) Aircraft related symbols such as Ehang (EH.US), AVICopter PLC (600038.SH), China Aerospace Times Electronics (600879.SH), Zhejiang Wanfeng Auto Wheel (002085.SZ), Wolong Electric Group (600580.SH), Anhui Yingliu Electromechanical (603308.SH), Weihai Guangwei Composites (300699.SZ), Jilin Chemical Fibre Stock (000420.SZ), Shaanxi Fenghuo Electronics (000561.SZ), Gaohua Technology (688539.SH), Xin Dong Lian Ke (688582.SH), and Beijing Andawell Science& Technology (300719.SH);

3) Aircraft operation and simulation flight related symbols such as Citic Offshore Helicopter (000099.SZ), Sichuan Haite High-Tech (002023.SZ), etc.

As China increasingly moves to the center of the world stage, military trade exports are expected to become a new growth point for the military industry sector.

After a rapid growth from 2020 to 2022, the military industry experienced significant performance differences in 2023 within the subdivided fields, with a pronounced structural divergence, and is expected to welcome high-quality development in the future. With the continuous advancement of equipment technology, new technologies and new products constantly emerge, which may create many investment opportunities in new domains of combat.

It is recommended to focus on the following two investment lines:

1) In the traditional aviation and aerospace field, it is advisable to focus on symbols with more sustainable growth and excess growth rates, related to the industry chain, including AVIC Shenyang Aircraft (600760.SH), Gaona Aero Material (300034.SZ), National Science Military Industry (688543.SH), Chengdu Tianjian Technology (002977.SZ), Guobo Electronics (688375.SH), Hubei Feilihua Quartz Glass (300395.SZ), Wuhan Guide Infrared (002414.SZ), Guizhou Space Appliance (002025.SZ), Jiangsu Tolan Alloy (300855.SZ), etc.

2) New trends in the military industry, it is recommended to focus on new technologies, new products, and new markets in the military industry, related industry chain symbols include Glarun Technology (600562.SH), Shaanxi Fenghuo Electronics (000561.SZ), Aerospace Intelligent Manufacturing Technology (300446.SZ), Gaohua Technology (688539.SH), Beijing Zhongkehaixun Digital S&T Co., Ltd. (300810.SZ), Guangzhou Haige Communications Group Incorporated (002465.SZ), Huayin Technology (688281.SH), Aerospace South Lake (688552.SH), Xin Dong Lian Ke (688582.SH), Aerospace Ch UAV (002389.SZ), Zhenlei Technology (688270.SH), Chengchang Technology (001270.SH), Xi'an Triangle Defense (300775.SZ), Runbei Aerospace Technology (001316.SZ), and Jiangxi Lianchuang Opto-Electronic Science&Technology (600363.SH), etc.

Risk warning: Limited production capacity at a certain link in the military industry chain may lead to delivery delays; quality issues during the mass production process of equipment may cause delays in delivery; the price drop after mass production of military products exceeds market expectations.