China Securities Co., Ltd.:Publicly offered fund military holdings continue to rise steadily, waiting quietly for the next round of structural recovery.

China Securities Co., Ltd. released a research report stating that as of the third quarter of 2024, according to the top ten public fund's holding data, the total market value of military stocks held was 166.981 billion yuan, accounting for 5.31% of the total holdings. Compared to the lowest point in 2024Q1 (4.11%), there was an increase of 1.2 percentage points, and compared to 2024Q2 (5.43%), there was a slight decrease of 0.12 percentage points. Looking at different regions, the total market value of military stocks held by public funds in Beijing, Shanghai, and Guangzhou-Shenzhen has all seen some recovery. In the third quarter of 24Q3, the holding of military stocks by public funds continued to rise, with the gradual implementation of military personnel adjustments and related institutional reforms. Post-14th Five-Year Plan orders are expected to be gradually issued, and with the backlog and additional demand, the willingness to hold positions is expected to continue to warm up in the future. The main points of China Securities Co., Ltd. are as follows: 1. As of the third quarter of 2024, according to the top ten public fund's holding data, the total market value of holdings was 3.1447.16 billion yuan, an increase of 16.14% compared to 2024Q1, and an increase of 18.91% compared to 2024Q2. Among them, the total market value of military stocks held was 1669.81 billion yuan, accounting for 5.31% of the total holdings, an increase of 1.2 percentage points compared to the lowest point in 2024Q1 (4.11%), and a slight decrease of 0.12 percentage points compared to 2024Q2 (5.43%). In 24Q3, the holding of military stocks by public funds continued to rise, with the gradual implementation of military personnel adjustments and related institutional reforms. Post-14th Five-Year Plan orders are expected to be gradually issued, and with the backlog and additional demand, the willingness to hold positions is expected to continue to warm up as the economic conditions shift. 2. Looking at different regions, the total market value of military stocks held by public funds in Beijing, Shanghai, and Guangzhou-Shenzhen has all seen some recovery. In 2024Q3, the public fund's top ten holdings of military stocks in Shanghai had the highest holding value, reaching 58.656 billion yuan, an increase of 28.53% compared to 24Q1, accounting for 50.42% of the total market value of military stocks held by public funds in the three regions, an increase of 0.52 percentage points from the beginning of the year; the public fund's top ten holdings of military stocks in Guangzhou and Shenzhen had a market value of 43.401 billion yuan, an increase of 35.24% compared to 24Q1, accounting for 37.30% of the total market value of military stocks held by public funds in the three regions, an increase of 2.21 percentage points from the beginning of the year. Among them, E Fund, Huaxia Fund, Rich Fund, and Nanfang Fund have relatively high market value holdings of military stocks. 3. The concentration of holdings by public funds has decreased, and high-quality targets are still favored. At the end of the third quarter of 2024, the total market value of the top ten holdings of public funds in 20 companies was 71.976 billion yuan, accounting for 43.10% of the total market value of military stocks held by public funds. The concentration of holdings decreased by 6.24 percentage points compared to 24Q1 and by 0.35 percentage points compared to 24Q2. Among them, funds hold a larger number of targets such as China CSSC, AVIC Jonhon Optronic Technology, and AVIC Shenyang Aircraft, with approximately 6.54%, 11.15%, and 6.08% of the circulating shares held, respectively, indicating a further increase in the shareholding percentage. Risk factors: 1. Defense budget growth is lower than expected; in recent years, the defense budget has maintained relatively stable growth, with positive military policies. However, there is a possibility of reduced defense budget expenditures due to changes in national policies and strategies. 2. Weapons and equipment delivery are lower than expected; in the post-epidemic period, coupled with regional tensions, the world economy and trade routes have been greatly affected, which may pose a risk of delays in construction and delivery, especially in industries such as shipbuilding. 3. Progress in related reforms is lower than expected; the country's judgment on the future situation and guiding ideology determine the industry's development prospects. National macroeconomic policies and industrial development policies have a significant impact on the strategic direction, industry selection, and investment and acquisition directions of military enterprises.