On favorable that the newly integrated China Aviation Industry Corporation will be set up on November 8, military & aviation sector experienced an over-all outburst. So far, Sichuan Chengfa Aero Science &Technology (600391) and Hafei Aviation Industry (600038) have reached their up-limit, and Xi'' An Aircraft International (000768), Sichuan Haite High-Tech (002023) and Jiangxi Hongdu Aviation Industry (600316) are reported up-raise of 6.15%,5.10% and 4.97% respectively.
Comment: The newly founded group will have its redundant assets eliminated through assets allocation optimization and realize financing through equity-participation among subsidies. On the other hand, it will also march ahead towards the regional economic development circle by setting up the helicopter headquarter in Tianjin, general aircraft headquarter in Zhuhai, and aero-engine headquarter in Shanghai. Listed companies subordinated to China Aviation Industry Corporation I include: China Aviation Optical-Electrical Tech (002179), Sichuan Chengfei Integration Tech (002190), Xi'' An Aircraft International (000768), Hubei Aviation Precision Machinery Tech (002013), Guizhou Liyuan Hydraulic (600765), Guizhou Guihang Automotive Components (600523) and China Resources (Jilin) Bio-chemical (600893); companies subordinated to China Aviation Industry Corporation II include: AVI China (02357.HK), Shenzhen Catic Real Estate (000043), Nan Fang Space Navigation Science & Tech (000738), Hafei Aviation Industry (600038), Jiangxi Hongdu Aviation Industry (600316), Harbin Dongan Auto Engine (600178), Jiangxi Changhe Automobile (600372) and Sichuan Chengfa Aero Science &Technology (600391). The new corporation will accelerate its military assets capitalization progress through injection of top-quality assets to related listed companies. However, given a relative high P/E ratio of the sector, we hereby maintain rating of “Neutral” for the segment, and advise investors to pay attention to potential risks.