The operating status of the aviation equipment sector tends to be stable, and the ability to resist macroeconomic pressure is strong: Aviation equipment is one of the subdivisions of the national defense and military industry, and it is also one of the "main lines" supporting the development of the military industry in recent years. Compared with other sectors The growth rate is faster. At the end of 2021, due to the rebalancing of the market style, the slowdown in the performance growth of some listed companies in the industry, and the price cuts of some military products, the military industry has experienced a decline for nearly four months. Although the industry is subject to market-style rebalancing in the short term, the fundamental logic has not changed much. Compared with the general industrial field, the biggest feature of the industry lies in its strong planning attributes. During the "14th Five-Year Plan" period, the needs of related enterprises in the industrial chain in the next five years are basically clear, and there are very few external interference factors. From the third quarter of 2020 to the third quarter of 2022, the aviation equipment sector only experienced a negative growth rate of net profit attributable to the parent company, second only to the liquor sector in terms of profit stability. From the perspective of ROE, the return on net assets of the aviation equipment sector has always been positive from 20Q3 to 22Q3. Affected by the epidemic in 2020, the annual average ROE will be 4.12%; in 2021, the ROE will increase to 6.62%, and both the single-quarter and annual indicators show an increasing trend. This reflects that the operation level of the aviation equipment industry is relatively stable, the ability to resist macro adverse factors is relatively strong, and the profitability has relatively high certainty.
C919 helps the large aircraft industry "take off": Large aircraft is a country's most important weapon, a concentrated expression of a country's technological capabilities, industrial level, and comprehensive strength, and is known as the "Pearl on the Crown of Industry". The large aircraft project has the characteristics of a long industrial chain, a high degree of correlation, and a great radiation-driven effect. The development and development of large aircraft projects can effectively promote the rapid growth of my country's economy, promote the adjustment of industrial structure, drive the upgrading of industrial technology, and improve the manufacturing capacity of the aviation industry. , management ability, and innovation ability, at the same time, promote the industrialization process of my country's civil aviation and comprehensively drive the development of my country's aviation industry. Japan’s Ministry of International Trade and Industry’s strategic report mentioned: “The aircraft industry is a high-value-added industry and a technologically advanced sector. It is a typical example of knowledge-intensive industries and can play a leading role in other industries.” In 2007, the development project of the large passenger aircraft C919 was launched. The C919 large passenger aircraft is a large jet civil aircraft independently developed by China in accordance with international civil aviation regulations and has independent intellectual property rights. As a major project identified in the "National Medium and Long-Term Science and Technology Development Plan (2006-2020)", the C919 large aircraft project aims to stand side by side with Boeing and Airbus and occupy a place in the civil aviation passenger aircraft market. In September 2022, the C919 successfully obtained the airworthiness certificate, and the first aircraft was officially delivered to China Eastern Airlines in December last year, and is expected to be put into commercial operation in the first quarter of 2023.
Raw materials related to the large aircraft industry are expected to benefit: In terms of raw materials, the raw materials of the large aircraft industry are mainly superalloys for engines, titanium alloys, carbon and its composite materials, rhenium materials, and high-performance aluminum materials.
1) Superalloy materials are key materials for manufacturing hot-end components of aerospace engines, mainly used for engine turbine blades, turbine disks, combustion chambers, guides, and some casings and seals. The development of my country's independent aerospace industry to develop advanced engines will bring about an increase in the market's demand for high-end and new superalloys.
2) High-temperature titanium alloys have the characteristics of low density, high specific strength, and good high-temperature mechanical properties, which can improve the thrust-to-weight ratio of aeroengines and are widely used in the aviation field. my country attaches great importance to the development of the titanium industry. In 2021, the overall domestic titanium industry market will be positive. The low-end product market will benefit from the demand for PTA and the chemical industry, showing a significant growth trend year-on-year. The high-end product market will benefit from the upgrading of aerospace and other fields, The impact of localization promotion, strong demand, and titanium alloys will have greater market development opportunities in aerospace fields such as aero engines in the future.
3) Aviation composite materials can be divided into resin matrix composites, carbon matrix composites, ceramic matrix composites and metal matrix composites according to the reinforced matrix. Resin-based composite materials are currently the most widely used and mature materials in the aviation composite material family. They are widely used in the fields of civil aircraft, military aircraft, and engines, and play a key role in promoting the upgrading of aviation equipment.
4) Rhenium is an important national defense strategic material and plays an important role in superalloy materials. The rhenium-containing single crystal high-temperature blades developed in recent years are used in a new generation of aircraft engines. With the expansion of the global civil aviation market and the continuous expansion of low-cost airlines around the world, the number of civil aviation engines will continue to grow. Due to regional tensions across the globe, the demand for military aerospace engines and rocket engines has surged. According to industry forecasts, the global demand for rhenium resources will more than double in the next 10 years.
5) High-performance aluminum is an ultra-high-strength deformed aluminum alloy, which is currently widely used in the aviation industry. It has good mechanical and processing properties, good plasticity after solution treatment, and good heat treatment strengthening effect. Generally, it has high strength and good toughness below 150°C (or even higher), and is an ideal structural material. In addition, aviation aluminum is light in weight and has a significant lightweight effect. It has replaced steel and occupies the leading position of current aviation materials. Aviation equipment has high requirements for aluminum materials, and is an important high-end application market for aluminum materials. The third-generation aluminum-lithium alloy materials and advanced composite materials accounted for 8.8% and 12% of the C919 body structure respectively. It can be seen that with the development of my country's aviation industry, all walks of life are integrated with each other, the military and civilians are jointly built, and industrial manufacturing has gradually entered the high-end manufacturing industry. Various new lightweight alloys such as aluminum alloys, magnesium alloys, titanium alloys, and carbon fiber composites The emergence of materials, complementing each other, naturally facilitates the smooth manufacture of the C919 large aircraft.
The logic of the future development of the large aircraft industry: The "Twentieth National Congress Report" clarified that it is necessary to coordinate and strengthen military struggles in all directions and fields, focus on actual combat military training, drastically deepen national defense and military reforms, and reconstruct the leadership and command system of the people's army and modern military affairs. Force system, military policy system, and accelerate the modernization of national defense and the armed forces. The above-mentioned documents provide a basic plan for the development of my country's aerospace industry in the next few decades, indicating that the future aviation equipment industry may have great development potential and prospects. According to the forecast of the average annual growth rate of China's GDP, the average annual growth rate of China's passenger turnover is 5.6%, and the average annual growth rate of the fleet is 5.1%. In the next two decades, China's air transport market will receive 9,284 jetliners, including 958 regional jets, 6,288 single-aisle jets and 2,038 dual-aisle jets. By 2041, China's fleet size will reach 10,007 aircraft, accounting for 21.1% of the global passenger aircraft fleet. China's aviation market will become the largest single aviation market in the world. As the domestic aircraft industry chain becomes more mature, the demand for future replacement of civil aviation will increase. The development prospects of the large aircraft industry chain are very broad, and the industry's prosperity is sufficient. If the overseas market can be successfully explored in the future, the certainty of industry growth will be further enhanced.
Investment suggestion: The Outline of the "14th Five-Year Plan" emphasizes that it is necessary to speed up the R&D and verification of advanced military aero-engines/civilian turbofan engine product development, and promote the landing and operation of C919 and the serialization of domestic regional airliners. The aviation industry may usher in a golden period of development. We believe that, as a high-prosperity track, relevant targets with relatively high industry barriers and strong core competitiveness in the large aircraft industry have relatively high market share in their respective segmented tracks, and their future development is relatively certain. Or will have a strong and sustained growth momentum, so we maintain the "outperform" rating.
