Investment Rating - The report initiates coverage on Aerospace Intelligence with a "Buy" rating and a target price of 26.00 RMB, based on a 20x PE valuation for 2026 [1][7]. Core Views - The company is expected to achieve growth driven by "technical barriers + policy dividends," leveraging aerospace technology transformation in oil and gas equipment and automotive smart cockpit sectors, while expanding its large-dosage drug column business for long-term stable growth [1][16]. Summary by Sections Company Overview - Aerospace Intelligence, formerly known as Lekai New Materials, underwent a major asset restructuring in 2023, acquiring 100% stakes in Aerospace Energy and Aerospace Molding, thus becoming the core listed platform of the Seventh Academy of Aerospace [2][25]. Financial Performance - The company is projected to achieve revenues of 58.60 billion RMB and 77.81 billion RMB for 2023 and 2024, respectively, with year-on-year growth rates of 20.10% and 32.78%. The net profit attributable to the parent company is expected to be 4.23 billion RMB and 7.92 billion RMB, reflecting growth rates of 61.36% and 87.02% [2][36]. Automotive Parts Business - Aerospace Molding, established in 2000, focuses on automotive interior and exterior parts, smart cockpit components, and lightweight engine parts. The company provided components for 10.95 million vehicles in 2023, accounting for 42% of national passenger car sales. The new energy vehicle segment is expected to constitute 72% of new products in 2024, surpassing industry penetration rates [3][16]. Oil and Gas Equipment Business - Aerospace Energy, founded in 2013, specializes in the research and manufacturing of perforating tools and high-end completion equipment. The company holds over 60% market share in unconventional oil and gas extraction and approximately 35% in conventional extraction. The demand for its products is expected to grow alongside the increase in domestic oil and gas production [4][17]. Market Perspective - The report highlights a discrepancy between market perceptions and the company's long-term growth potential, particularly in the automotive parts sector benefiting from electrification and intelligent transformation, and the oil and gas equipment sector supported by policy initiatives [5][19]. Profit Forecast and Valuation - The forecast for net profit attributable to the parent company for 2025-2027 is 9.48 billion RMB, 11.02 billion RMB, and 12.76 billion RMB, respectively. The report selects comparable companies with an average PE of 30x for 2026, assigning a target PE of 20x to Aerospace Intelligence [6][46].

Event Overview - The company released its 2025 semi-annual report, reporting Q3 revenue of 505 million yuan, a year-on-year increase of 9.8% and a quarter-on-quarter increase of 6.5% [2] - The net profit attributable to the parent company was 31 million yuan, up 36.0% year-on-year and 56.4% quarter-on-quarter [2] Revenue and Gross Margin Analysis - In Q3 2025, the wholesale sales of passenger vehicles reached 7.686 million units, a year-on-year increase of 14.7% and a quarter-on-quarter increase of 8.1% [3] - The sales of new energy passenger vehicles were 4.024 million units, up 24.2% year-on-year and 10.9% quarter-on-quarter [3] - The gross margin for Q3 2025 was 22.3%, down 1.6 percentage points year-on-year and 2.4 percentage points quarter-on-quarter due to price wars and tariff pressures [3] Profitability and Expense Management - The expense ratios for sales, management, R&D, and financial costs were 0.4%, 9.0%, 5.6%, and 0.9% respectively, with variations in year-on-year and quarter-on-quarter performance [4] - The net profit margin for Q3 2025 was 6.2%, an increase of 1.2 percentage points year-on-year and 2.0 percentage points quarter-on-quarter, primarily driven by increased revenue and improved expense ratios [4] Strategic Initiatives in Robotics - The company is actively expanding into the robotics sector, focusing on core components such as planetary gear reducers and joint modules [5] - A joint venture, Jiangsu Pacific Joint Electric Drive Technology, has been established to advance the development of joint modules [5] - The company has also strategically invested in leading robotics manufacturer Wuhan Gelanruo Intelligent Robotics to develop cycloidal reducers [5] Financial Projections - Revenue projections for 2025-2027 are 2.222 billion yuan, 2.803 billion yuan, and 3.541 billion yuan respectively, with corresponding net profits of 191 million yuan, 246 million yuan, and 315 million yuan [8] - The expected earnings per share (EPS) for the same period are 0.33 yuan, 0.42 yuan, and 0.54 yuan, with price-to-earnings (PE) ratios of 41, 32, and 25 respectively [8] Market Challenges - Passenger vehicle sales, new business initiatives, and overseas factory progress have not met expectations, and raw material prices have risen more than anticipated [7]

Core Viewpoint - The article emphasizes the remarkable achievements of China's automotive industry, particularly in the fields of new energy vehicles (NEVs) and smart technology, highlighting its global leadership and the strategic importance of government policies in driving this transformation [5][8][20]. Group 1: Achievements of China's Automotive Industry - China's NEV production and sales have ranked first globally for ten consecutive years, with a projected market share of 38% by 2024 [15]. - In 2024, domestic NEV sales are expected to reach 12.87 million units, with a penetration rate of 40.9%, up from just 0.9% in 2015 [17]. - China has become the world's largest automobile exporter, with exports increasing from 1.08 million units in 2020 to an estimated 5.86 million units in 2024 [20]. - The number of NEV charging facilities in China is the highest globally, with over 17.35 million charging points expected by 2025, representing more than 70% of the global total [21]. Group 2: Underlying Logic - The development of NEVs is driven by energy security, environmental safety, and the automotive industry's significance to the national economy [24][28]. - The reliance on imported oil is high, with a projected dependency rate of 72% in 2024, prompting the push for NEVs to reduce this dependency [24]. - The automotive sector contributes approximately 6-7% to China's GDP, making it a crucial pillar of the economy [28]. Group 3: Top-Level Design - The Chinese government has established a "four-in-one" top-level design framework for NEV development, focusing on technological innovation, market cultivation, ecosystem construction, and infrastructure support [30]. - Policies such as purchase subsidies and tax exemptions have been implemented to stimulate early market growth [31]. - The "dual credit" policy has been introduced to balance the development of traditional and new energy vehicles [31]. Group 4: Realistic Foundation - China has maintained its position as the world's largest automotive market since 2009, supported by rapid economic growth and increasing consumer purchasing power [37][39]. - The historical contributions of joint ventures have built a comprehensive automotive supply chain in China, enhancing local capabilities [40]. - The complete industrial system in China supports the resilience and competitiveness of the automotive supply chain, with a domestic production rate of over 95% for key components expected by 2030 [41]. Group 5: Challenges and Opportunities - The automotive industry faces intense competition, leading to price wars that could undermine long-term technological competitiveness [45]. - Despite challenges, the industry is focusing on innovation and efficiency to meet consumer demands for smart and electric vehicles [46]. - China's automotive supply chain is highly integrated, allowing for rapid response and recovery during crises, such as the chip shortage in 2022 [46].

Core Insights - The 10th Guangzhou International Auto Parts and Accessories Aftermarket Exhibition (AAG) opened on August 27, 2025, at the Poly World Trade Center in Guangzhou, showcasing the growth and influence of the automotive aftermarket in the Guangdong-Hong Kong-Macao Greater Bay Area and Southeast Asia [1][3]. Industry Overview - Since its inception in 2015, the AAG has developed into a significant professional exhibition for the automotive aftermarket, with a display area of 80,000 square meters, a 14% increase from the previous year, and participation from 1,781 brand enterprises, a 17% increase [3]. - The theme for this year's exhibition is "Intelligent Manufacturing, Driving Change, and Linking the Future," highlighting innovation in the automotive aftermarket [3]. Key Participants and Exhibits - The exhibition features over 1,200 auto parts companies, with more than 500 from the aftermarket sector and over 350 involved in the new energy sector [5]. - Notable exhibitors include leading brands such as Sumax, Anhui Dain, and Ningbo Tianwei, showcasing products ranging from suspension systems to brake components and electric vehicle solutions [6][9]. Thematic Areas and Activities - The exhibition includes three major thematic areas: auto consumables, commercial vehicles, and UTS modification salon, emphasizing the integration of automotive customization culture and aesthetics [12][14]. - A series of forums and discussions will be held, focusing on the future trends of the aftermarket service industry [14][24]. International Engagement - The event attracted 44 professional buyer groups from various regions, including Southeast Asia and the Middle East, indicating strong international interest [21][23]. - The overseas invitation efforts covered numerous countries, enhancing global participation [23]. Future Trends and Conferences - The exhibition aligns with Guangzhou's strategy to build a modern industrial system, focusing on intelligent connected new energy vehicles [26]. - Upcoming conferences will address critical topics such as the globalization of the automotive aftermarket and digital transformation [27]. Special Initiatives - AAG has planned various activities to celebrate its 10th anniversary, including art installations made from recycled auto parts and interactive experiences for attendees [28][32].

Core Viewpoint - The Chinese automotive industry is facing a "severe winter" due to a combination of market saturation, industry transformation, and global uncertainties, necessitating collective efforts to nurture its potential for recovery and growth [1][2]. Industry Overview - The 12th China Automotive Blue Book Forum was held in Wuhan, highlighting the challenges and future directions of the automotive sector with over 200 industry leaders in attendance [1]. - The theme of the forum, "Winter Bud," symbolizes hope and resilience amidst the current downturn in the automotive market [2]. Market Dynamics - The Chinese automotive market, which peaked at 28.88 million units in 2017, is projected to decline to approximately 23 million units this year, intensifying competition and leading to a wave of industry consolidation [2]. - The automotive industry is undergoing significant changes driven by the "four transformations," which include electrification, intelligence, connectivity, and sharing [1][3]. Company Initiatives - Dongfeng Motor Corporation is implementing a "five transformations" strategy (lightweight, electrification, intelligence, connectivity, and sharing) to adapt to the new market conditions [3]. - The company has made progress in its "three electric" industrial park and has successfully addressed technical challenges in fuel cell technology [3]. - Dongfeng has launched high-end electric brand "Lantu," aiming to provide high-quality automotive solutions for the new energy era [3]. Regional Development - Wuhan, recognized as "China's Auto City," produced 1.5485 million vehicles last year and aims to enhance its automotive industry cluster to a trillion-yuan scale [3]. - The city is focusing on balancing pandemic control with economic development, striving to become a hub for innovation and self-owned automotive brands [3].