Core Viewpoint - The Zhonghang Index (884931.WI) experienced a strong intraday surge, with a daily increase of 2.02% on October 24, indicating positive market sentiment towards the aerospace sector [1] Group 1: Index Performance - The Zhonghang Index (884931.WI) saw a daily rise of 2.02% [1] - The strong performance reflects a bullish trend in the aerospace industry [1] Group 2: Leading Stocks - Key stocks contributing to the index's rise include: - Aviation Power - Aviation Development Technology - Zhonghang Fei - Guizhou Aviation - Zhonghang Shenfei [1]

Group 1 - The commercial aerospace sector is experiencing a surge, with significant stock price increases for companies like China Satellite, Shanghai Hanxun, and Aerospace Electronics, leading to a rise in aerospace ETFs [1] - A major conference has prioritized technological self-reliance and highlighted the goal of becoming a "strong aerospace nation," further elevating the status of commercial aerospace [1] - The conference also emphasized the modernization of national defense and military, indicating a strategic focus on emerging industries such as commercial aerospace, low-altitude economy, unmanned equipment, and deep-sea information technology as future directions for the military industry [1] Group 2 - The low-altitude economy is gaining attention, with the General Aviation ETF showing a 2.06% increase, focusing on companies involved in the development of general aviation aircraft and drones [2] - Key companies in the low-altitude economy include Wan Feng Ao Wei, Hongdu Aviation, Aerospace Rainbow, and AVIC Helicopter, which are engaged in various aspects of general aviation and drone technology [2]

Core Insights - On October 23, 2023, brokerage firms provided target prices for listed companies, with significant increases noted for companies in the pet feed and communication equipment sectors, specifically Guibao Pet, StarNet RuiJie, and Weisheng Information, with target price increases of 61.09%, 50.73%, and 43.78% respectively [1][2]. Target Price Increases - Guibao Pet (301498) received a target price of 118.00 yuan, reflecting a target price increase of 61.09% from the latest closing price [2]. - StarNet RuiJie (002396) has a target price of 39.16 yuan, with a target price increase of 50.73% [2]. - Weisheng Information (688100) has a target price of 51.00 yuan, showing a target price increase of 43.78% [2]. - Other notable companies include China Unicom (600050) with a target price increase of 36.22% and Wens Foodstuff Group (300498) with an increase of 33.28% [2]. Brokerage Recommendations - A total of 59 listed companies received brokerage recommendations on October 23, with Tonghuashun (300033) receiving the highest number of recommendations at 5, followed by Guibao Pet with 4, and Meihua Biological (600873) with 3 [3][4]. - The sectors represented include software development, feed, and chemical products [4]. Rating Adjustments - On October 23, only one company, Huayou Cobalt (603799), had its rating upgraded from "Hold" to "Buy" by Huayuan Securities [5]. - This indicates a positive outlook for the energy metals sector [5]. First-Time Coverage - Nine companies received first-time coverage from brokerages on October 23, with notable mentions including Innovation New Materials (600361) rated "Buy" by Huayuan Securities, and YunTu Holdings (002539) and Meihua Biological (600873) both rated "Buy" by Global Fortune Financial [6]. - Other companies receiving first-time ratings include Babi Food (605338) and Shengquan Group (108850) [6].

Core Viewpoint - The "Taihang 7" gas turbine generator set has achieved a significant milestone by operating for 25,000 hours and generating 122 million kilowatt-hours, setting a record for the longest operation of a domestically produced gas turbine unit [1] Group 1: Company Achievements - The "Taihang 7" gas turbine is a 7-megawatt marine modified gas turbine that features dual fuel capability, quick start, low energy consumption, stable operation, and easy maintenance [1] - The generator set is a collaborative project between China Aviation Engine Group and China National Offshore Oil Corporation, recognized as one of the first batch of gas turbine innovation development demonstration projects by the National Energy Administration [1] Group 2: Operational Performance - Since reaching 20,000 hours of cumulative operation in February 2025, the "Taihang 7" gas turbine has operated stably and without faults for an additional 5,000 hours, achieving the 25,000-hour operational goal [1] - The operational success has validated the turbine's capabilities in marine environments, including moisture resistance, salt fog resistance, and mold resistance, confirming its reliability, maintainability, supportability, testability, safety, and environmental adaptability [1]

Investment Rating - The report maintains an "Accumulate" rating for the defense and military industry [6]. Core Insights - The upcoming 20th Central Committee's Fourth Plenary Session will focus on the "14th Five-Year Plan," which is expected to support the modernization of national defense and military by 2035, building on the achievements of the "13th Five-Year Plan" [9][23]. - The J-35 aircraft's production ramp-up is anticipated to boost the traditional domestic demand, with upstream material suppliers already announcing significant contracts that will support future revenue growth [9][23]. - The aerospace engine industry is experiencing sustained high demand, with the completion of price adjustments and inventory reduction, alongside ongoing state-owned enterprise reforms [10][23]. - The commercial aerospace sector is entering a critical development phase, with plans to launch approximately 2,100 satellites by 2025 and significant advancements in satellite manufacturing capabilities [11][23]. - Global military expenditure is expected to reach new highs in 2024, driven by geopolitical tensions, creating opportunities for domestic military trade [12][23]. Summary by Sections Industry Overview - The defense and military industry comprises 144 listed companies with a total market value of 28,244.53 billion and a circulating market value of 24,587.80 billion [3]. Market Performance - The defense and military index fell by 4.70% this week, ranking 23rd among 31 major industries [8][36]. - The current PE (TTM) for the defense and military sector is 73.8 times, with various sub-sectors showing different valuations [8][42]. Key Developments - The report highlights the importance of the upcoming 20th Central Committee's Fourth Plenary Session, which will focus on the "14th Five-Year Plan" and its implications for national defense [9][23]. - The aerospace engine sector is expected to benefit from military trade advancements and the introduction of new engine models, such as the CJ-1000A, which is set to enter commercial operation by 2030 [10][11][23]. - The commercial space sector is projected to see significant growth, with plans for large-scale satellite launches and advancements in satellite manufacturing capabilities [11][35]. Investment Opportunities - The report suggests focusing on companies involved in missile and military electronics, aerospace engines, and military trade, highlighting specific firms such as Zhonghang Chengfei, Zhonghang Shenfei, and Huazhong Technology [19][25][26][27][28].

Core Points - The 2025 Asia General Aviation Exhibition will be held from November 27 to 30 in Zhuhai, with the theme "New Era of General Aviation, Exploring Unlimited Possibilities in Low Altitude" [1] - The exhibition aims to strengthen the Zhuhai "Double Airshow" brand, with significant improvements in scale, internationalization, and the number of product debuts compared to the first edition [1][3] Exhibition Scale and Participation - The exhibition area for the 2025 Asia General Aviation Exhibition has reached approximately 60,000 square meters, doubling the size of the first edition [3] - Over 300 companies from 21 countries and regions, including China, the United States, Germany, Canada, and France, have confirmed participation, with more than 150 aircraft expected for static and dynamic displays [5] - The proportion of international exhibitors has reached 25%, indicating a significant increase in internationalization [5] Product Launches and Innovations - The exhibition will serve as a platform for the global debut of new products, technologies, and services, with several leading companies showcasing their latest innovations [6] - Notable exhibits include the VoloXpro aircraft by Wan Feng Aircraft Industry, the VE25-100 model by Volant Aerospace, and various eVTOL aircraft by companies like Huayu Xianxiang and Lanyi Aviation [6] Flight Performances - The exhibition will feature exciting flight performances, including a collaboration between the South African aerobatic team and the Hongxing aerobatic team, showcasing advanced aerial maneuvers [7] Ticketing and Visitor Experience - Tickets for the exhibition went on sale on October 21, with three categories available: personal tickets at 200 yuan, discounted tickets at 100 yuan for specific age groups, and combo tickets for multiple attractions [8][10] - Daily ticket sales are capped at 15,000, and attendees are encouraged to use intercity rail services for transportation [9]

Market Overview - The aviation equipment sector rose by 0.91% on October 21, with Filihua leading the gains [1] - The Shanghai Composite Index closed at 3916.33, up 1.36%, while the Shenzhen Component Index closed at 13077.32, up 2.06% [1] Stock Performance - Filihua (300395) saw a significant increase of 14.17%, closing at 80.50 with a trading volume of 426,500 shares [1] - Other notable performers included Hangxin Technology (300424) with a 6.02% increase, and Hangyu Technology (688239) with a 4.42% increase [1] - The table below summarizes the performance of key stocks in the aviation equipment sector: | Code | Name | Closing Price | Change (%) | Volume (thousand) | |--------|--------------|---------------|------------|-------------------| | 300395 | Filihua | 80.50 | 14.17 | 426.5 | | 300424 | Hangxin Tech | 17.79 | 6.02 | 248.6 | | 688239 | Hangyu Tech | 43.67 | 4.42 | 48.3 | | 920642 | Tongyi Aerospace | 14.97 | 2.46 | 20.1 | | 002297 | Boyun New Material | 9.00 | 2.39 | 471.7 | | 603261 | *ST Lihang | 21.10 | 2.23 | 12.5 | | 300034 | Steel Research | 16.38 | 2.12 | 120.9 | | 920006 | Shengcao Technology | 27.85 | 1.94 | 11.3 | | 688287 | *ST Guandian | 4.78 | 1.92 | 14.9 | | 002625 | Guangqi Technology | 46.78 | 1.92 | 189.7 | [1] Capital Flow - The aviation equipment sector experienced a net inflow of 601 million yuan from institutional investors, while retail investors saw a net outflow of 454 million yuan [2] - The following table outlines the capital flow for key stocks: | Code | Name | Institutional Net Inflow (yuan) | Institutional Net Ratio | Retail Net Inflow (yuan) | Retail Net Ratio | |--------|--------------|----------------------------------|-------------------------|--------------------------|------------------| | 300395 | Filihua | 439 million | 13.32% | -83.56 million | -10.78% | | 688122 | Western Superconductor | 92.06 million | 7.09% | -36.26 million | -4.30% | | 300424 | Hangxin Tech | 54.02 million | 12.49% | -798,450 | -10.64% | | 600893 | Aero Engine | 47.64 million | 7.85% | 390,730 | -8.50% | | 688237 | Superlative Aerospace | 28.34 million | 18.13% | 530,500 | -21.53% | [3]

Summary of the Conference Call on Aviation Power Company and Industry Overview - The conference call focuses on **Aviation Power**, a company involved in the military aviation sector, particularly in engine manufacturing and maintenance. The discussion highlights the **military trade** industry and its growth potential, especially in the context of military aircraft deliveries and engine aftermarket services. Key Points and Arguments 1. **Market Position and Valuation**: Aviation Power holds a position equivalent to aircraft manufacturers in military trade, possessing pricing power and negotiation capabilities. The company is currently undervalued and is considered a potential investment opportunity [2][3]. 2. **Growth in Military Aircraft Deliveries**: The increase in military aircraft deliveries is expected to drive demand for engine replacements and maintenance. This trend is anticipated to lead to a concentrated release of maintenance and refurbishment needs [2][6]. 3. **Aftermarket Business Potential**: The aftermarket for aviation engines is characterized by high-value consumables with short maintenance intervals. The total market size for the domestic aviation engine aftermarket is projected to reach between **400 billion to 600 billion** by the end of 2024 [2][8][10]. 4. **Positive Impact on Aircraft Manufacturers**: The engine maintenance business significantly benefits aircraft manufacturers, as they hold pricing power in the maintenance segment. The profit margins from maintenance services are higher than those from new aircraft sales, which is expected to enhance the profitability of engine manufacturers [2][11]. 5. **New Aircraft Models**: The new **J-35 series** of fighter jets from AVIC Shenyang Aircraft Corporation, including variants designed for export, is expected to provide strong growth momentum. The certainty of production ramp-up for these models is high, with significant export potential [2][5][15]. 6. **Investment Thesis for Aviation Power**: The investment rationale for Aviation Power includes its independent status in military trade, increasing share of aftermarket business, and potential breakthroughs in domestic engine production capabilities [3][7]. 7. **Future Market Dynamics**: The next 20 years are expected to see a significant increase in aviation engine-related transactions and revenue, driven by the high-value consumable nature of engines and the growing demand for maintenance services [8][9]. 8. **Challenges and Opportunities for Domestic Engine Companies**: Domestic engine manufacturer **Daheng Power** faces challenges such as rising R&D and financial costs, but its gross margin remains stable. If margins improve, it could lead to significant stock price catalysts [12]. 9. **Importance of Control Systems**: Control systems are critical components in aviation engines, with domestic systems showing strong pricing power. The maintenance share of control systems is projected to grow from **8% in 2021 to 16% in 2024**, indicating rapid growth in this segment [13]. 10. **Beneficial Segments in the Aviation Engine Market**: Other segments benefiting from the aviation engine market include blades, coatings, and fasteners, with specific companies identified for their strong market positions in these areas [14]. Additional Insights - The J-35 fighter jet is positioned to enhance China's military trade competitiveness, breaking the trend of export models being less advanced than domestic ones. This positions AVIC Shenyang for significant growth in orders and revenue [15][20]. - The disparity in orders between the U.S. F-22 and F-35 is attributed to factors such as development costs, pricing strategies, and production capabilities, which may inform future strategies for Chinese military aircraft [17][19].

Investment Rating - The report maintains a "Positive" investment rating for the defense and military industry in China [5] Core Viewpoints - The military trade market in China is continuously expanding, with significant developments such as Indonesia's procurement of the J-10 fighter jet, indicating a rapid growth in the military trade market scale [11] - The "Qianfan Constellation" satellite network has resumed operations after a 7-month hiatus, with the recent launch of 18 satellites, suggesting an acceleration in low-orbit satellite deployment [12] - The current market conditions show stabilization in military sector stock prices, with a focus on domestic demand and the upcoming "14th Five-Year Plan" which is expected to clarify new equipment construction plans [16][17] Summary by Sections Investment Suggestions and Targets - The report highlights several investment targets within the military electronics sector, including: - Aerospace Electric (002025, Buy) - Zhonghang Optics (002179, Buy) - Aerospace Electronics (600879, Not Rated) - In the new quality and domain sector, notable mentions include: - Haige Communication (002465, Buy) - New Light Optoelectronics (688011, Increase Holding) - For the engine chain, key targets include: - West Superconducting (688122, Buy) - Huqin Technology (688281, Increase Holding) - In military trade and main equipment, companies like AVIC Shenyang Aircraft (600760, Not Rated) are highlighted [17]

Investment Rating - The report maintains a "Positive" investment rating for the industry [2]. Core Viewpoints - The report emphasizes the importance of military trade equipment, particularly focusing on aviation engines, which hold a primary position in military exports. The long-tail effect of high-value consumables drives asset duration [6][8]. - The J-35 model from AVIC Shenyang Aircraft Corporation is highlighted for its strong domestic and foreign demand, comparable to the U.S. F-35 in multi-purpose attributes [36][39]. - The report anticipates significant growth in the military aviation engine aftermarket, estimating a market space exceeding 400 billion yuan over the next 20 years, with an average annual value of 21.44 billion yuan [23][24]. Summary by Sections Section 1: Aviation Engine Market - Aviation engines are categorized as high-value consumables, with long-term replacement and maintenance needs driven by the existing aircraft market [13]. - The report cites that from 2014 to 2018, aviation engines accounted for 3.6% of global military trade orders, which decreased to 2.0% from 2019 to 2023. However, the share of aircraft in military trade orders increased from 44.08% to 50.09% during the same period [12][11]. - The aftermarket for military aviation engines is projected to be around 428.74 billion yuan over the next 20 years, with a significant portion attributed to maintenance and replacement needs [23][24]. Section 2: AVIC Shenyang Aircraft Corporation - The J-35 model is positioned against the U.S. F-35, with strong demand anticipated both domestically and internationally [36][39]. - The report notes that the F-35 has significantly outperformed the F-22 in terms of order volume, with 3,497 units ordered compared to the F-22's 195 units [39][94]. Section 3: Investment Strategy - The report suggests a focus on companies that enhance product strength, penetration rates, and average transaction values, particularly in the context of the 14th Five-Year Plan [97]. - Key investment targets include companies involved in missile production, unmanned systems, and military AI, with specific recommendations for firms like Aerospace Electric and Feilihua [97].