As the 90th founding anniversary of the People's Liberation Army (PLA) comes, the military engineering sector saw bullish news recently. The military engineering sector will see more favorable policies on the reform of the military engineering sector, indicated Zou Runfang, an analyst. More military engineering orders will bring fundamental opportunities and the military and civil integration will implement.
Various reforms to implement
The central military and civil integration and development committee passed various policies recently. It specified the leadership mechanism, working rules and key work in military and civil integration and it has made substantive progress.
Since the military and civil integration has been lifted as a national strategy in 2015 and driven by supporting polices, private enterprises have participated in the supporting military engineering system. It broke the monopoly of the sector and will help establish a scientific research and production system with small cores and big coordination. The meeting also further promoted the military and civil integration.
The Ministry of Finance held a meeting on deepening the military and civil integration recently, It required further speeding up in preparing guideline on supporting the development of the military and civil integration. It pointed out that it will provide financial guarantees to key programs in military and civil integration and promote the sharing of R&D equipment and facilities. It will support military troops suspending paid services and promote new progress in financial supports to the development of the military and civil integration. It also indicated that finance play a key role in capitals guarantee in deepening military and civil integration and required following the requirements on military and civil integration in the whole process of financial work.
The State Administration of Science, Technology and Industry for National Defence held a meeting on promoting the reform of military engineering institutes in early July. It released the opinion on transforming military engineering institutes into enterprises. The transformation of the first 41 military engineering institutes has initiated. It marks that the reform of military engineering institutes has entered the key implementation phase.
Polarization seen in performance of different sectors
According to FC Financial Big Data, 22 of the 41 companies engaged in national defense and military engineering sector have unveiled interim reports on forecasting performance. Among them, 14 companies expected to gain profits, 5 to see decline in profits, 1 to stop loss and 2 to suffer loss. Net profits of 6 companies including Xinjiang Machinery Research Institute Co., Ltd., Xi'an Tian He Defense Technology Co., Ltd., Jiangsu Guoxin Corp., Ltd., Jianglong Shipbuilding Co., Ltd., Navtech INC., and Beijing BDStar Navigation Co., Ltd. grew by over 100 percent year on year.
The interim report of Xinjiang Machinery Research Institute, which predicted the highest growth in performance, showed that the company is expected to earn profits ranging from 87.4037 million yuan to 92.8664 million yuan in the first half of this year, an increase of 380-410 percent from a year earlier. It gained 18.2091 million yuan of profits at the same period of last year. The company explained that the company’s orders for military products surged significantly in 2017. Meanwhile, it strengthened internal control management, which enhanced the settlement of businesses with clients and hence boosted revenues from principal business.
Seen from the earnings forecast which have been released, net profits attributable to shareholders of parent companies of listed military companies saw stable growth in the first six months of this year, according to a research report of China Securities. Net profits attributable to shareholders of parent companies of 101 military companies recorded 5.155 billion yuan to 6.487 billion yuan, up by 10.13 percent to 38.60 percent when compared with that at the same period of last year. Consolidated financial statements resulting from extensional mergers and acquisitions and increasing demand for products were the two major factors contributing to the great surge in performance. In terms of sectors, net profits attributable to shareholders of parent companies of those companies specialized in aerospace, ground weapon and nuclear power sectors hiked by over 50 percent, while those of material and shipping sectors showed general performance.
In the opinion of Zou, profits of companies engaged in military engineering sector will keep steady growth in 2017. But due to no new orders, the total growth and the proportion of companies seeing rapid growth in performance will fall when compared with those in 2016.
Zou remarked that restructuring of military institutes and military and civilian integration will accelerate, and dividend of reform of military engineering system will be released in a faster pace in the next half of this year. Investors are suggested to make deployment in those to-be-restructured military institutes with clear equity relation, good asset situation, top-level design of groups and development matching with planning. With the end of influence of military reform, new equipment cycle under the new system will come soon, and there will be more orders. In addition, as military and civilian integration will be put into practice, priority should be given to the military companies in information and high-end processing and manufacturing filed.
Various reforms to implement
The central military and civil integration and development committee passed various policies recently. It specified the leadership mechanism, working rules and key work in military and civil integration and it has made substantive progress.
Since the military and civil integration has been lifted as a national strategy in 2015 and driven by supporting polices, private enterprises have participated in the supporting military engineering system. It broke the monopoly of the sector and will help establish a scientific research and production system with small cores and big coordination. The meeting also further promoted the military and civil integration.
The Ministry of Finance held a meeting on deepening the military and civil integration recently, It required further speeding up in preparing guideline on supporting the development of the military and civil integration. It pointed out that it will provide financial guarantees to key programs in military and civil integration and promote the sharing of R&D equipment and facilities. It will support military troops suspending paid services and promote new progress in financial supports to the development of the military and civil integration. It also indicated that finance play a key role in capitals guarantee in deepening military and civil integration and required following the requirements on military and civil integration in the whole process of financial work.
The State Administration of Science, Technology and Industry for National Defence held a meeting on promoting the reform of military engineering institutes in early July. It released the opinion on transforming military engineering institutes into enterprises. The transformation of the first 41 military engineering institutes has initiated. It marks that the reform of military engineering institutes has entered the key implementation phase.
Polarization seen in performance of different sectors
According to FC Financial Big Data, 22 of the 41 companies engaged in national defense and military engineering sector have unveiled interim reports on forecasting performance. Among them, 14 companies expected to gain profits, 5 to see decline in profits, 1 to stop loss and 2 to suffer loss. Net profits of 6 companies including Xinjiang Machinery Research Institute Co., Ltd., Xi'an Tian He Defense Technology Co., Ltd., Jiangsu Guoxin Corp., Ltd., Jianglong Shipbuilding Co., Ltd., Navtech INC., and Beijing BDStar Navigation Co., Ltd. grew by over 100 percent year on year.
The interim report of Xinjiang Machinery Research Institute, which predicted the highest growth in performance, showed that the company is expected to earn profits ranging from 87.4037 million yuan to 92.8664 million yuan in the first half of this year, an increase of 380-410 percent from a year earlier. It gained 18.2091 million yuan of profits at the same period of last year. The company explained that the company’s orders for military products surged significantly in 2017. Meanwhile, it strengthened internal control management, which enhanced the settlement of businesses with clients and hence boosted revenues from principal business.
Seen from the earnings forecast which have been released, net profits attributable to shareholders of parent companies of listed military companies saw stable growth in the first six months of this year, according to a research report of China Securities. Net profits attributable to shareholders of parent companies of 101 military companies recorded 5.155 billion yuan to 6.487 billion yuan, up by 10.13 percent to 38.60 percent when compared with that at the same period of last year. Consolidated financial statements resulting from extensional mergers and acquisitions and increasing demand for products were the two major factors contributing to the great surge in performance. In terms of sectors, net profits attributable to shareholders of parent companies of those companies specialized in aerospace, ground weapon and nuclear power sectors hiked by over 50 percent, while those of material and shipping sectors showed general performance.
In the opinion of Zou, profits of companies engaged in military engineering sector will keep steady growth in 2017. But due to no new orders, the total growth and the proportion of companies seeing rapid growth in performance will fall when compared with those in 2016.
Zou remarked that restructuring of military institutes and military and civilian integration will accelerate, and dividend of reform of military engineering system will be released in a faster pace in the next half of this year. Investors are suggested to make deployment in those to-be-restructured military institutes with clear equity relation, good asset situation, top-level design of groups and development matching with planning. With the end of influence of military reform, new equipment cycle under the new system will come soon, and there will be more orders. In addition, as military and civilian integration will be put into practice, priority should be given to the military companies in information and high-end processing and manufacturing filed.
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