Guoxin Securities: Future passenger traffic and fleet size in the aviation industry will grow simultaneously, emphasizing domestication substitution and autonomous controllability.

Guotai Junan Securities released a research report stating that in the next twenty years, it is expected that 9,736 aircraft will be delivered to the market in China, with a market size reaching $1,478.9 billion, accounting for 21.2% of the global aviation market. On the supply side, COMAC is accelerating capacity release through measures such as expanding the final assembly base and promoting the airworthiness of domestic engine development. On the demand side, the total number of C919 orders has exceeded 1,500, with confirmed orders totaling nearly $100 billion, providing ample support for COMAC’s capacity ramp-up. The domestic production rate of large aircraft is about to break through, and this institution focuses on high-quality companies in the upstream of the large aircraft industry chain that have passed COMAC certification and embedded in the core supply chain; it also emphasizes the logic of domestic substitution and the direction of independently controllable orders that have certainty.

Guotai Junan Securities’ main viewpoints are as follows:

The global civil aviation market has emerged from the pandemic “shadow,” and China’s aviation market has become a trillion-dollar core growth engine.

1. The global civil aviation industry has basically returned to normal operating levels, and passenger traffic and fleet size will grow in tandem in the future. It is expected that global aviation passenger turnover will achieve an annual growth rate of 4.73%, increasing to 2.52 times the 2024 level by 2044. 2) In the next 20 years, the size of China’s aviation market is expected to reach $1.4 trillion, with narrow-body passenger aircraft dominating. It is anticipated that 9,736 aircraft will be delivered to the market, with a market size of $1,478.9 billion, accounting for 21.2% of the global aviation market; in terms of delivery models, 7,250 single-aisle passenger aircraft are expected to be delivered, accounting for 74.46% of the total deliveries.

On the supply side “capacity ramp-up,” on the demand side “internal and external expansion”

1. On the supply side: By the end of 2025, a cumulative delivery of 30 C919 aircraft is expected, with current capacity still being the core limitation on deliveries. COMAC is accelerating capacity release through measures such as expanding the final assembly base and promoting the airworthiness of domestic engine development. The year 2026 is expected to be a key year for capacity ramp-up, with no less than 28 aircraft expected to be delivered. 2) On the demand side: The total number of C919 orders has exceeded 1,500, and confirmed orders totaling nearly $100 billion provide ample support for COMAC’s capacity ramp-up.

The domestic production rate of large aircraft is about to break through, and “on-chain” companies will enjoy dividends.

1. Materials and components: The use of composite materials in large aircraft is increasing with each generation; the proportion of composites in the C919 is 12%, and it is expected to reach 51% in the C929, with T300 and T800 being the main application grades; among metal materials, the proportion of domestically produced aluminum accounts for over 50%, basically achieving self-sufficiency, and the use of new-generation aluminum-lithium alloys has increased, accounting for 7.4% of the airframe structure, with broad prospects for domestic substitution, while titanium alloys are gaining usage due to their performance advantages. 2) In terms of complete aircraft: The value of the airframe structure accounts for about 30%-35% of the entire aircraft, essentially achieving domestic substitution, benefiting most directly from the certainty of capacity expansion; the value of the aircraft engine accounts for about 20%-25%, and the civil aviation engine market is expected to exceed $2 trillion in the next 20 years, with turbine blades and other hot-end components accounting for the highest value proportion in the overall aircraft engine. Currently, the development of the domestically produced aircraft engine CJ-1000 is progressing smoothly, with domestic substitution entering a countdown; the value of onboard systems accounts for about 25%-30%, mainly developed through “Sino-foreign joint ventures,” which is a key link in improving the domestic production rate.

Focus areas

1. Closely monitor high-quality companies in the upstream of the large aircraft industry chain that have passed COMAC certification and are embedded in the core supply chain; these companies will directly enjoy the dividends of large aircraft capacity ramp-up, such as those in the fields of high-temperature alloy engines, composite materials for airframes, and core castings and forgings. 2) Emphasize the logic of domestic substitution and the direction of independently controllable orders that have certainty, such as airframe structure manufacturing enjoying volume growth dividends, and engines benefiting from the replacement of domestic aircraft engines.

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