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].

Core Viewpoint - The company, AVIC Heavy Machinery, has provided insights into its product offerings and recent developments in its hydraulic control business, highlighting advancements in technology and new product developments [2]. Product Offerings - Domestic products include aircraft fuselage and wing structure forgings, medium and small forgings, aviation engine disc and shaft forgings, aerospace engine ring forgings, nuclear power blades, high-speed rail components, mining scrapers, and automotive crankshafts [2]. - International products primarily consist of engine forgings for companies like GE, Rolls-Royce, IHI, and ITP, as well as aircraft forgings for Boeing and Airbus [2]. Recent Developments - The hydraulic control business segment, particularly through its subsidiary AVIC Liyuan Hydraulic Co., Ltd., has made significant progress in 2024 with new product development [2]. - The company has successfully tackled design challenges related to a "certain UAV hydraulic source subsystem," achieving high integration, lightweight, and high reliability, and has secured 3 million yuan in R&D funding [2]. - Additionally, the company has completed the delivery of a prototype for a robotic joint plunger pump and is assembling prototypes for deep-sea plunger pump products, aiming for installation assessment opportunities [2].

Core Viewpoint - The aviation equipment sector experienced a slight increase of 0.08% on October 20, with notable gains from individual stocks, particularly Maixinlin, which surged by 8.19% [1] Group 1: Market Performance - The Shanghai Composite Index closed at 3863.89, up 0.63%, while the Shenzhen Component Index closed at 12813.21, up 0.98% [1] - Maixinlin led the aviation equipment sector with a closing price of 62.65 and a rise of 8.19%, with a trading volume of 62,300 shares and a transaction value of 388 million yuan [1] - Other notable performers included ST Lihang, which rose by 4.98%, and Super Aerospace Technology, which increased by 4.97% [1] Group 2: Stock Performance Summary - A detailed table of stock performance shows various companies in the aviation equipment sector, with their closing prices, percentage changes, trading volumes, and transaction values [1][2] - The sector saw a net outflow of 778 million yuan from major funds, while retail investors contributed a net inflow of 545 million yuan [2] Group 3: Fund Flow Analysis - The fund flow analysis indicates that major funds had a net outflow from several stocks, including Feilihua, which saw a net inflow of 94.19 million yuan from major funds but a net outflow from retail investors [3] - ST Lihang and ST Lian Shi also experienced significant net inflows from retail investors despite overall negative trends in major fund flows [3]

Core Insights - Indonesia has officially announced the procurement of 42 Chinese J-10 fighter jets, with a total budget of $9 billion, marking a significant breakthrough for Chinese military exports [1][2][4]. Group 1: Procurement Details - The Indonesian government has approved a budget of $9 billion for the purchase of 42 J-10 fighter jets, with each unit priced at approximately $214 million [1][5]. - This procurement represents a shift in Indonesia's military purchasing strategy, which previously favored Western and other non-Chinese aircraft [4]. Group 2: Market Impact - The sale of J-10 fighter jets to Indonesia marks the second international sale of this model, following Pakistan's earlier purchase of 25 units [2][3]. - The successful procurement by Indonesia is expected to elevate the status of Chinese fighter jets in the international arms market, transitioning the J-10 from a "cheap" option to a "mid-to-high-end" fighter [4]. Group 3: Strategic Context - The decision to procure J-10s was influenced by the performance of these aircraft during the May 2025 India-Pakistan air conflict, where J-10s successfully engaged Indian aircraft [3][4]. - Indonesia's interest in the J-10 has grown in the context of regional security dynamics, particularly in response to perceived threats from India [3].

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].

Core Insights - The defense and military industry index experienced a decline of -4.70% over the past week, ranking 23rd out of 31 in the Shenwan primary industry [7][41] - The current PE-TTM for the defense and military industry is 83.33, which is at the 76.67 percentile compared to the past decade, indicating a relatively high valuation level [12][15] - The report highlights significant individual stock performances, with North China Long Dragon leading with an increase of 8.71% over the past week, while Guorui Technology saw a decline of -14.00% [17][41] Industry and Stock Market Review - The defense and military industry index has shown a decline of -1.92% over the past month, ranking 11th out of 31 [9][41] - Over the past year, the industry index has increased by 16.91%, ranking 19th out of 31 [3][41] - The trading volume for the defense and military industry reached 310.8 billion yuan this week, a year-on-year decrease of -8.63% but a week-on-week increase of +128.08% [31][34] Important Company Announcements - The report includes various significant announcements from companies in the defense sector, such as strategic cooperation agreements and stock repurchase plans [38] Industry News - Indonesia confirmed its plan to purchase Chinese-made J-10 fighter jets, with a defense budget of at least 9 billion USD approved [40][41] - Successful launches of low-orbit satellite internet groups and the sixth batch of the Qianfan constellation were reported, indicating advancements in commercial aerospace [40][42] Investment Recommendations - The report suggests focusing on key investment themes such as military trade, commercial aerospace, unmanned equipment, military AI, and low-altitude economy [43]

Core Insights - The aviation equipment sector experienced a decline of 3.56% on October 17, with Aerospace Technology leading the drop [1] - The Shanghai Composite Index closed at 3839.76, down 1.95%, while the Shenzhen Component Index closed at 12688.94, down 3.04% [1] Stock Performance Summary - Notable gainers included: - Jiachi Technology (688708) with a closing price of 73.62, up 2.74% [1] - Chaozhuo Aerospace (688237) with a closing price of 52.92, up 0.28% [1] - Significant decliners included: - Aerospace Technology (688239) with a closing price of 40.13, down 9.37% [2] - Huayin Technology (688281) with a closing price of 65.96, down 7.44% [2] - The overall trading volume for the aviation equipment sector showed a net outflow of 2.236 billion yuan from major funds, while retail investors saw a net inflow of 1.777 billion yuan [2][3] Fund Flow Analysis - Major funds showed a net outflow from several stocks, including: - Aerospace Technology (688239) with a net outflow of 31.8377 million yuan [3] - Chaotuo Aerospace (688237) with a net outflow of 17.6257 million yuan [3] - Retail investors contributed positively to stocks like: - Aerospace Technology (688239) with a net inflow of 19.8205 million yuan [3] - Jiachi Technology (688708) with a net inflow of 17.775 million yuan [3]

Core Insights - The 7th China Tianjin International Helicopter Expo showcases advancements in China's helicopter and drone technology, highlighting the development of the entire industry chain in general aviation and low-altitude economy [1][9] Group 1: Helicopter Developments - The AC series civil helicopters, recognized as "air rescue tools," play a significant role in economic development and emergency rescue operations [3][5] - The AC311A and AC312E models are exhibited in their actual forms, emphasizing their capabilities in public service sectors [3][5] - By 2029, the scale of China's civil helicopter fleet is expected to exceed 1,700 units, with flight hours surpassing 300,000 [7][9] Group 2: Low-altitude Economy - A new 5,000 square meter low-altitude economy pavilion was added to the expo, featuring innovative aircraft designs that showcase the potential of the low-altitude economy [9][11] - A new generation of medium vertical take-off and landing fixed-wing drones, capable of participating in Arctic scientific research, was highlighted, featuring a hybrid power design and a maximum payload of 40 kilograms [11] - The drone has a maximum endurance of 10 hours and a cruising speed of up to 120 kilometers per hour [11] Group 3: Technological Innovations - Several concept aircraft currently under development were showcased, integrating advanced technologies such as intelligent flight control and new energy power systems [13][15] - These innovations reflect the latest explorations in industry technological advancements [15]

Core Viewpoint - The 7th China Tianjin International Helicopter Expo showcases the achievements of China's helicopter industry, emphasizing innovation, modernization, and international cooperation in the aviation sector [1][8]. Group 1: Exhibition Highlights - The Aviation Industry Corporation of China (AVIC) presented over 70 self-developed helicopter products, demonstrating the full industrial chain development of helicopters [1]. - The main exhibition area covered nearly 2,600 square meters, focusing on the helicopter equipment development and the latest advancements in the low-altitude economy [3]. - The exhibition featured various units including "system operations," "emergency rescue," "technological innovation," "system support," and "comprehensive services," showcasing advanced design and manufacturing capabilities [3]. Group 2: Low-altitude Economy Development - The expo highlighted the growing interest in electric vertical takeoff and landing (eVTOL) aircraft, with new products like AR-E40, AR-E300, and AR-E300A being showcased [5]. - AR-E800 has entered the research and test flight phase, with a confirmed order of 20 units signed with Jingdezhen High-tech Zone and 140 units in intention orders for various applications [5]. - The low-altitude economy pavilion spanned 5,000 square meters, featuring models of various aircraft including AG600 and AC series helicopters, aimed at expanding the low-altitude economic industry [6]. Group 3: Flight Performances and Collaborations - The flight performances included the debut of the Z-20T helicopter, which attracted significant attention, alongside the AG600 aircraft participating for the first time [8]. - AVIC announced the launch of AR-600 and AR-2000 unmanned helicopters, achieving substantial results in signed cooperation agreements, including 193 aircraft contracts on the opening day [8]. - The expo also hosted various themed activities to enhance industry communication and collaboration, promoting the vision of helicopters improving modern life [8].

Core Viewpoint - 中航西飞's stock has experienced a decline of 8.53% year-to-date, with a recent drop of 2.02% on October 17, 2023, indicating potential challenges in market performance [1] Financial Performance - For the first half of 2025, 中航西飞 reported a revenue of 19.416 billion yuan, a year-on-year decrease of 4.49%, while the net profit attributable to shareholders was 689 million yuan, reflecting a year-on-year growth of 4.83% [2] - Cumulative cash dividends since the A-share listing amount to 3.792 billion yuan, with 890 million yuan distributed over the past three years [3] Shareholder Information - As of October 10, 2023, 中航西飞 had 177,900 shareholders, a decrease of 2.89% from the previous period, with an average of 15,586 circulating shares per shareholder, an increase of 2.97% [2] - The top ten circulating shareholders include several ETFs, with 富国中证军工龙头 ETF holding 26.7165 million shares, an increase of 8.9489 million shares from the previous period [3]