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].