CSC Securities: Periodic fluctuations in demand in the aerospace industry in Q3 2024 still exist, with the upper level pushing for the accelerated development of the industry.

Aviation Securities released a research report stating that recently, multiple aerospace defense equipment were exhibited for the first time at the Zhuhai Airshow. The disclosure of major space projects and commercial satellite internet constellation plans by various countries is continuously strengthening the certainty of the high prosperity development of the aerospace industry in the next few years under the "aerospace power" strategy. At the current point in time, market risk appetite remains at a high level. In the short term, market optimism for the recovery of the aerospace industry demand may be stronger than the "decline" shown in the third quarter report. The sector's trend will be highly sensitive to certain industry events. In the medium to long term, the improvement in underlying demand driven by future industry demand release and the valuation recovery brought by new market expectations will lead the aerospace sector to re-enter a longer-term upward trend. As of October 31, 2024, the third quarter reports of listed aerospace companies have been disclosed. According to the overall statistics and analysis of the third quarter reports of listed companies, demand-side disruptions still exist in multiple sub-sectors such as aerospace defense, satellite manufacturing, satellite communications, and satellite remote sensing. The growth rate of enterprise revenue or net profit year-on-year has further declined, and demand remains under pressure in the short term. Main viewpoints of Aviation Securities: Aerospace Defense: Short-term performance fluctuations still exist, with long-term demand without worries In the first three quarters of 2024, the aerospace defense industry's demand has periodic fluctuations, and short-term demand may still be difficult to realize in the profit statement; The aerospace defense sector will become one of the military industry sub-sectors with significant comparative advantages in marginal improvement and potential growth continuity in 2025 and throughout the "14th Five-Year Plan" period. As defense security "essential" equipment with informational and consumable properties, the long-term demand for the aerospace defense industry is certain. As the military industry is about to enter the end of the "14th Five-Year Plan" and approaches the 100th anniversary of the founding of the military in 2027, the demand-side fluctuations in the aerospace defense industry are only temporary. With the dual drive of the recovery in underlying demand growth and the industry's "high prosperity", the aerospace defense industry is expected to show higher industry base growth elasticity. Commercial Aerospace: With the development of aerospace power, the industry's development will accelerate and gather momentum In the first three quarters of 2024, the revenue situation in the satellite industry and its sub-sectors continued the inertia slowdown trend from the first half of 2024. In the first three quarters of 2024, the overall growth rate of the satellite industry has slowed down, with the year-on-year growth rates of satellite manufacturing, satellite communications, and satellite remote sensing all continuing to decline, while the year-on-year growth rate of satellite navigation has continued to increase. The situation of each sub-sector is as follows: Satellite Manufacturing: The profit statement fluctuations in the satellite manufacturing industry in the first three quarters of 2024 were mainly due to factors such as delayed downstream demand planning adjustments and product upgrades. However, the year-on-year growth in inventory, as well as the maintenance of contract liabilities and prepayments at a high level, still have the potential to gradually realize in the profit statement. Combined with the high-speed growth of China's aerospace launch frequency plan in 2024, the industry's revenue and net profit scale may recover in the fourth quarter; Satellite Communications: In the first three quarters of 2024, the overall revenue growth rate of the industry still fluctuated in single digits, and the application market space of the satellite communications industry has not yet seen significant changes, and faces intensified competition in the global traditional satellite communications application market. However, whether it is the continued expansion of traditional satellite communications equipment and services in consumer markets, the continued expansion of high-orbit satellite internet in applications such as civil aviation and maritime, or the continuous advancement of satellite internet industry space infrastructure construction, will promote the gradual acceleration of the satellite communications industry in the medium to long term; Satellite Navigation: The revenue and net profit growth rates of the satellite navigation industry continued to increase in the first three quarters of 2024. We believe that the performance growth of companies related to satellite navigation is mainly due to the continuous increase in the penetration rate of China's "Beidou" satellite navigation terminal market and the continuous opening up of overseas markets. Although contract liabilities and prepayments decreased in the first three quarters, the growth rate of inventory remained basically stable, indicating that the development of the satellite navigation industry, which is dual-use for military and civilian purposes, will still be on the "fast lane"; Satellite Remote Sensing: In the first three quarters of 2024, the overall year-on-year growth rate of satellite remote sensing companies' revenue has recovered to more than 10%. Although the net profit growth rate has declined, considering that the net profit in the fourth quarter is the largest proportion of the year for remote sensing companies, and that companies continue to see growth in inventory, as space infrastructure construction such as remote sensing satellites continues to improve, it is expected that downstream demand will remain adequate, and the industry's growth rate will see recovery. Recommended areas and stocks to watch: Short-term focus: Hunan Aerospace Huanyu Communication Technology (688523.SH), Geovis Technology Co., Ltd (688568.SH), Teemsun Technology (301571.SZ). Aerospace Defense: Guizhou Space Appliance (002025.SZ), Chengdu Spaceon Electronics (002935.SZ), North Navigation Control Technology (600435.SH), North Industries Group Red Arrow (000519.SZ), Chengdu Sino-Microelectronics Tech. (688709.SH), Hubei Feilihua Quartz Glass (300395.SZ), Teemsun Technology (301571.SZ); Commercial Aerospace: Beijing Aerospace Shenzhou Intelligent Equipment Technology (300455.SZ), Guobo Electronics (688375.SH), China Satellite Communications (601698.SH), Hunan Aero.Ce Huanyu Communication Technology (688523.SH), Jushri Technologies, Inc (300762.SH), Chengdu (300101.SZ), Guangzhou Haige Communications Group Incorporated (002465.SZ), Geovis Technology Co., Ltd (688568.SH).Risk warning: 1) Macroeconomic fluctuations may impact the civil products business, while military procurement may not meet expectations; 2) There may be uncertainties in the development and finalization progress of some aerospace equipment, which could affect the overall market growth of the industry chain; 3) Fluctuations in raw material prices may lead to increased costs; 4) With the reform of military pricing mechanisms and an increase in orders, some military products may experience price reductions, impacting the performance of related companies; 5) The industry is highly prosperous, but if there is a rapid increase in a short period of time, there may be a mismatch between performance and valuation at some point.