EB SECURITIES: C919 enters the fast delivery period, domestic industrial chain value is expected to be further enhanced.

EB SECURITIES released a research report stating that the domestic large aircraft industry has vast potential, current orders are full, and with independent controllable background, the industry's development has strong certainty. With the increase in the localization rate of materials, avionics, engines, and other links, the value-added of the domestic industry chain is expected to further increase. The firm specifically recommends key suppliers such as Avic Xi'an Aircraft Industry Group (000768.SZ), Jiangxi Hongdu Aviation Industry (600316.SH), Hunan Aerospace Huanyu Communication Technology (688523.SH), Beijing Andawell Science & Technology (300719.SZ), Fujian Torch Electron Technology (603678.SH), and suggests attention to titanium material supplier Baoji Titanium Industry (600456.SH). The main points of EB SECURITIES are as follows: Domestic Large Aircraft: Difficulties in achieving success, preparing for flight Large aircraft generally refer to transport aircraft with a takeoff weight exceeding 100 tons, including mainline passenger aircraft with more than 150 seats. In the international civil aviation industry, Boeing and Airbus dominate the market with over 90% market share. Narrow-body passenger aircraft are the mainstream models of civil aviation aircraft, accounting for 76.7% of the total number of narrow-body passenger aircraft in China's civil aviation transport aircraft in the past 23 years. Since the 1970s, China has made multiple research and development attempts for domestically-produced large aircraft. In 2008, Commercial Aircraft Corporation of China (COMAC) was established, and in 2009, it officially launched the large-scale passenger aircraft with 150 seats, named COMAC 919. On December 9, 2022, the world's first C919 large-scale passenger aircraft was delivered to China Eastern Airlines Corporation, and its first commercial flight was completed in May 2023. Compared with competing models such as the Boeing 737 series and the Airbus A320 series, the C919 narrow-body passenger aircraft has significant advantages in aerodynamics, composite material application, and economics as a latecomer. In addition, China's domestically developed wide-body passenger aircraft, C929, is about to enter the detailed design stage and has already signed the first user framework agreement with Air China Limited. Supply and demand: C919 has orders worth billions of dollars, with order deliveries accelerating from the second half of 2024 As of February 2025, according to incomplete statistics from the firm, Commercial Aircraft Corporation of China (COMAC) has accumulated nearly 1,500 C919 orders, with confirmed orders totaling nearly 1,000 aircraft. According to announcements from China Southern Airlines and Air China Limited, the average purchase prices for the basic and extended range models of the C919 are approximately $99 million per aircraft and $108 million per aircraft respectively. Based on this estimation, the cumulative confirmed orders for C919 currently correspond to a value of nearly a billion dollars. In addition, COMAC is actively expanding into the international markets of Europe, America, and Southeast Asia. On the supply side, deliveries have accelerated significantly in the second half of 2024, with a total of 16 aircraft delivered as of February 2025. According to COMAC, the production capacity of C919 will reach 50 aircraft by 2025, with an expected output of 30 aircraft. Looking ahead, according to COMAC's predictions, in the next 20 years, approximately 9,323 aircraft are expected to be delivered to the Chinese market, with a market value of approximately $1.4 trillion USD. The industry chain is long, and there is room to increase the localization rate and domestic value-added. The C919 aircraft adopts the internationally common "main manufacturer-supplier" model, with manufacturing processes split based on value. The aircraft structure, engine, avionics, and other segments account for approximately 30%-35%, 20%-25%, 25%-30%, and 10%-15%, respectively. In terms of aircraft structure, the China Aviation Industry Corporation (AVIC) subsidiaries play a leading role, achieving a basic level of domestic manufacturing. Regarding materials, advanced materials are extensively used in Chinese large aircraft, with composite materials/titanium alloys/lithium-aluminum alloys accounting for 12%/9.3%/7.66% in the C919 aircraft. The current localization rate of avionics is low, with the majority of core systems being developed and supplied by Sino-foreign joint venture companies. In terms of engines, the C919 uses the LEAP-1C engine from the joint venture CFM company of GE in the US and Safran in France, while Commercial Aircraft Corporation of China (COMAC) is actively promoting the development of domestic engines such as the CJ-1000. Risk factors: risks of industry chain integration, risks of production expansion falling below expectations, risks of international market expansion falling below expectations.