CITIC Securities: Grasping three investment trends and laying out opportunities for the growth of materials by 2025.

CITIC SEC released a research report, stating that looking forward to 2025, emerging industries such as low-altitude economy, SAF, hydrogen energy, synthetic biology, and others will accelerate industrialization under policy guidance. The improvement in demand and market dynamics in the military, semiconductor, nuclear power, and solar industries will release profits. Emerging technologies such as solid-state batteries, silicon-based negative electrodes, lithium battery recycling, AI smartphones, automotive lightweighting, amorphous motors, electronic skin, extraction of titanium dioxide using the sulfate process, and the production of hexanedinitrile through butadiene synthesis will bring flexible demand for materials driven by the development of ShenZhen New Industries Biomedical Engineering, new technologies, and trends. It is optimistic about three investment themes: policy and themes, industry demand and market dynamics improvement, as well as product and technology innovation and iteration. It is recommended to actively position oneself in the growth opportunities in related industry chains and material segments. The main points from CITIC SEC are as follows: Focus on core driving factors to grasp the investment trend in the industry. Currently, investment opportunities in the materials field can be categorized into three driving factors: policy and themes, industry demand and market dynamics improvement, and product/technology innovation and iteration. 1) Industries driven by policies and themes include low-altitude economy, SAF, hydrogen energy, and synthetic biology, which are currently in the early stages of development. Although the current market size is not large, the potential is sufficient. Investment opportunities often follow the introduction of specific policies and changes in market trends. 2) The defense industry, semiconductor, nuclear power, and solar industries have passed the earliest start-up period. Investment opportunities are mainly driven by changes in industry demand and market dynamics. Materials in specific time periods driven by industry factors have high growth potential, or industry profits may rebound alongside market improvement. 3) The third type of driving factor is the innovation and iteration of products/technology. It is optimistic about the demand flexibility of materials brought about by the development of solid-state batteries, silicon-based negative electrodes, lithium battery recycling, AI smartphones, automotive lightweighting, amorphous motors, electronic skin, and extraction of titanium dioxide using the sulfate process, as well as the production of hexanedinitrile through butadiene synthesis. Actively grasp thematic trading opportunities catalyzed by policies. 1) The low-altitude economy, as a new productive force, is one of the most favored industries by policies entering 2024. At the same time, relevant national departments plan to establish a specialized authority for the low-altitude economy to better coordinate resources at all levels to promote industry development. It is optimistic about the opportunities for materials and components brought about by the rapid development of eVTOL in the low-altitude economy. 2) The global carbon reduction policy is accelerating in implementation. It is expected that SAF will reach a turning point in demand by 2025, and global SAF demand is expected to reach 15 million tons by 2030, with a market size of 226.6 billion yuan. Profitability is guaranteed under technological and qualification restrictions. 3) The hydrogen energy policy has accelerated significantly in 2024, with a focus on diverse applications. There is significant growth potential in the electrolyzer and fuel cell segments of the hydrogen energy industry. It is optimistic about the materials segments that have technological barriers and are expected to achieve domestic substitution in the future. 4) The national bio-manufacturing industry action plan will be introduced soon, and policies in various regions continue to strengthen. It is expected that the synthetic biology sector will usher in a market trend resonant with performance and policy by 2025. It is optimistic about platform-type, business extension-type, and equipment consumables-type companies. Focus on the high certainty of demand-driven by demand dynamics and profit recovery brought about by market dynamics improvement. 1) In 2024, new equipment and new aircraft models will start a new cycle in the defense industry demand. The military materials sector is expected to continue to benefit from the recovery of downstream orders. It is optimistic about areas such as titanium materials, high-temperature alloys, and carbon fibers. 2) According to WSTS, global semiconductor sales are expected to achieve a growth rate of 12.5% in 2025. At the same time, the penetration rate of third-generation semiconductors in power devices is rapidly increasing, coupled with the long-term theme of domestic substitution. It is optimistic about areas such as wafer manufacturing materials, equipment components, advanced packaging materials, silicon carbide substrates, etc. 3) The approval process for third-generation units has entered a normalization stage, with a record high of 11 approved nuclear power units from January to October 2024. Core components have entered a concentrated delivery peak period. It is optimistic about areas such as nuclear power valves, nuclear power sealing components, and control rods for nuclear power. 4) The bidding for solar energy shows marginal growth, and the industry's competitive landscape is expected to improve. It is optimistic about areas such as silver paste, solder strips, aluminum frames, etc. Product/technology innovation and iteration, optimism for the flexibility in demand for related segments. 1) Since 2023, significant progress has been made in the research and industrialization of solid-state batteries. EVTank predicts a global solid-state/hybrid solid-state battery shipments CAGR of about 150% from 2023 to 2030. The oxide and polymer technology routes for electrolyte materials are worth noting. 2) The demand for silicon-based negative electrodes is expected to reach 60,000 to 70,000 tons by 2026, more than double the demand size in 2023. The CVD process is worth noting. According to related company announcements and environmental impact assessments, the total capacity under construction or planned for lithium battery recycling in China is approximately three times the existing capacity, with lithium iron phosphate recycling becoming an important direction. 3) Heat dissipation materials benefit from the AI technology upgrade cycle for consumer electronics. It is expected that the market space for graphite film and VC will reach 16.8 billion and 17.4 billion yuan, respectively, by 2027, with corresponding CAGRs of 23.6% and 30.6% from 2023 to 2027. 4) Magnesium alloy is an excellent lightweight material for automotive industry. It is expected that the global demand for magnesium alloy in the automotive industry will reach 1.195 million tons in 2030, corresponding to a CAGR of 16.5% from 2023 to 2030. 5) Non-crystalline stator iron cores for drive motors in new energy vehicles can achieve reduced loss and heat dissipation pressure. It is expected that the market size for non-crystalline motor belt materials in the global market for new energy vehicle motors from 2025 to 2030 will achieve a CAGR of 129%. 6) Benefiting from the industrialization of medical equipment and Siasun Robot & Automation, the global electronic skin market is expected to reach 2.26 billion US dollars by 2032, with a CAGR of over 17% from 2022 to 2032. 7) Emerging technologies offer broad potential investment opportunities. It is optimistic about new technologies and domestic alternatives for titanium dioxide and hexanedinitrile. Risk factors: Progress and effectiveness of policy implementation.Below expectations; the development and market promotion of new products are below expectations; competition in various industries is intensifying; technological progress is causing drastic changes in industry structure; downstream demand is below expectations; industry capital expenditure is below expectations; industrial prosperity recovery is below expectations; overseas restrictions on China's semiconductor and other industries are tightening; technological breakthroughs are below expectations, etc."Bonjour, comment vas-tu aujourd'hui?" "Hello, how are you today?"