Investment Rating - The report maintains a positive outlook on the domestic commercial aircraft engine industry, suggesting significant investment opportunities in the sector [5]. Core Insights - The demand for commercial aircraft engines is expected to grow due to the increasing delivery of new aircraft and the rising need for maintenance and repair services for existing engines [2][3]. - The global commercial aircraft engine market is characterized by a duopoly, with high technical barriers creating a protective moat around leading manufacturers [12][18]. - The domestic commercial aircraft engine market is in its early stages of industrialization, with promising prospects driven by the demand for domestic large aircraft [4][5]. Summary by Sections Market Demand - The commercial aircraft engine market consists of two main segments: forward (new engine installations) and aftermarket (maintenance and repair) [27]. - The forward market is driven by new aircraft deliveries and the need for spare engines, while the aftermarket is linked to the maintenance of engines in service [28]. - The global commercial aircraft engine forward market is projected to be approximately $1.46 trillion from 2025 to 2044, with an average annual demand of about 5,284 engines [29][31]. Industry Performance - Since 2021, the revenue of overseas commercial aircraft engine manufacturers has grown rapidly, with significant improvements in profitability [3][59]. - GE Aviation's commercial engine business is expected to see a CAGR of 21% from 2023 to 2025, with operating profit margins increasing from 22.13% in 2022 to 26.60% in 2025 [3][59]. - Rolls-Royce's civil aerospace business is projected to have a CAGR of 23% from 2022 to 2025, with operating profit margins improving from -3.79% in 2021 to 20.52% in 2025 [3][59]. Investment Opportunities - The report suggests focusing on investment opportunities within the domestic commercial aircraft engine supply chain, which is expected to benefit from the entry of domestic engines into the civil aviation market [5]. - Key companies to watch include those involved in engine integration, control systems, metal casting, and raw materials [5].

Core Viewpoint - The report from Huachuang Securities emphasizes the significant potential of the domestic commercial aviation engine market in China, which is currently in its early stages with a market penetration rate of less than 1% for domestic engines. The focus is on three key areas within the domestic commercial aviation engine supply chain: core component manufacturers, high-temperature alloy suppliers, and raw material suppliers [1]. Group 1: Commercial Aviation Engine Analysis - Core components hold significant weight in the aviation engine structure, with the hot end being crucial for manufacturing and replacement. The FADEC control system is the mainstream technology [1]. - Value distribution shows that blades account for 26%, short nacelles for 25%, other parts for 21%, and control systems for 14% of the total value [1]. - The aftermarket is dominated by main manufacturers, with lifecycle value being high. According to Rolls-Royce, after-sales revenue can reach up to four times the initial sale price, making the aftermarket a critical source of profit and cash flow [1]. Group 2: Business Model of the Commercial Aviation Engine Industry - Main manufacturers operate on a "super tool holder + long-term blade" profit model, characterized by oligopolistic market control (CFM International, Pratt & Whitney, Rolls-Royce, GE) and high barriers to entry due to technology, funding, and cycle constraints. They offer significant discounts on initial pricing to capture market share while locking in customers through bundled services like TotalCare [2]. - Suppliers benefit from high barriers to entry and can become hidden champions within the industry. The collaboration model between main manufacturers and suppliers has stringent entry requirements, with international certification taking 6-10 years [2]. Group 3: Global Supply Chain Valuation - Main manufacturers have a stable valuation center, anchored by long-term growth potential. The average PE ratio for global main manufacturers is 30.2 times, with GE Aerospace at 42 times, Safran at 31 times, and Rolls-Royce at 18 times [3]. - Suppliers enjoy a valuation premium due to their scarcity and high certainty, with an average PE ratio of 68.5 times for key suppliers, significantly higher than that of main manufacturers. This premium is driven by strong technological scarcity and stable demand across new aircraft and maintenance scenarios [3]. Group 4: Potential of China's Commercial Aviation Engine Market - The Changjiang series of commercial aviation engines aims to break through key technological barriers, with the CJ1000A and CJ2000 models targeting narrow-body and wide-body aircraft, respectively [4]. - China's aviation market is poised for significant growth, with projections indicating that by 2044, the country will have 10,175 passenger aircraft, with a compound annual growth rate of 4.4% from 2024 to 2044. The total scale of the commercial aviation engine market in China is expected to exceed 2.6 trillion yuan over the next 20 years, with an annualized scale of over 130 billion yuan [4].

Core Viewpoint - The commercial aviation engine market in China has significant potential, with projections indicating a total market size exceeding 2.6 trillion yuan over the next 20 years, translating to an annualized scale of over 130 billion yuan [1] Group 1: Market Potential - The after-sales market is expected to reach approximately 100 billion yuan annually, contributing to a combined total of 240 billion yuan per year from both the engine market and after-sales services [1] Group 2: Investment Recommendations - The report suggests focusing on three key areas within the domestic aviation engine supply chain: - Core supporting companies, including Hangzhou Engine, Aero Engine Technology, and Aero Engine Control [1] - Suppliers of high-temperature alloys and other basic components, with continued recommendations for Yingliu Co., and attention to Wanze Co., Hangya Technology, and Hangyu Technology [1] - Raw material suppliers, highlighting AVIC High-tech [1]