Aviation securities: Industries are showing signs of "fundamental repair + event catalysis", and the turning point of commercial aviation is expected to be near.

CASC Securities released a research report, stating that in October, the commercial aerospace industry exhibited a dual feature of "fundamental repair + event catalysis". In the short term, satellite launch progress and policy favorable factors are still the main drivers of the market. The attention on upstream industries like satellite manufacturing and rocket manufacturing continues to rise, and related companies' performances are expected to be the first to materialize; in the medium to long term, with the large-scale deployment and construction of constellations, breakthroughs in reusable rocket technology, and the landing of integrated space and ground applications, downstream demand in communication, remote sensing, and other application areas is expected to be released. Coupled with the expansion of new areas such as space computing power and low-earth economy, the industry as a whole is expected to achieve a shift in focus in the midst of volatility. Key points from CASC Securities are as follows: As of October 31, 2025, the third quarter reports of commercial aerospace industry listed companies for 2025 have been fully disclosed, showing a positive signal of order recovery and indicating that the industry turning point is approaching. Specifically: On the income statement, all sub-sectors have shown improvement. Satellite manufacturing sector has seen a recovery in growth, turning net losses into profits; satellite communication application income has increased, but the recovery of profitability still needs time; satellite navigation has shown steady performance and is the most stable area in the current sub-sector race in terms of supply-demand structure; satellite remote sensing income growth rate has slightly increased and profits have slightly increased, but commercialization needs to be strengthened; satellite control income and net profits have both grown rapidly, making it a more promising sector in terms of growth. On the balance sheet, there are clear signals of order recovery. Liabilities from contracts and advances received in all sub-sectors have seen positive growth, indicating a visible recovery of short-term demand orders in the commercial aerospace sector, with the industry expected to reach a turning point in revenue and performance growth in the final year of the "14th Five-Year Plan". Looking at recent industry developments, the commercial aerospace sector has many positive factors, specifically: Reusable rocket technology entering an intensive maiden flight period. By the end of 2025 to early 2026, several reusable rockets in China, including Blue Arrow Space's Zhuque 3, China Aerospace Science and Technology Corporation's Lijian 2, Interstellar Honor's Hyperbolic 3, and Star River Power's Wisdom Star 1, are set to have their maiden flights. Reusable rocket technology is expected to become a key turning point in the commercial development of the aerospace industry. Low-earth satellite internet constellation construction is accelerating. The "Guoxing Constellation" has successfully launched 3 high-orbit and 13 sets of low-orbit networking satellites, and the commercial networking satellite "Qianxing Constellation" has also launched 6 groups of 18 satellites in one launch, with a total of 108 satellites launched, signaling a comprehensive acceleration phase in the construction of low-earth satellite internet constellations at a national level. The policy opening of satellite operating licenses closely aligns with top-level design, creating a synergistic effect. Currently, the three major operators have obtained satellite communication operational "tickets" based on their advantages in basic telecommunications business, and the business model is expected to present a diversified development trend. In the short term, government-led scenarios such as disaster relief and long-distance communication will be the first to be implemented. Consumer-level markets such as direct satellite connections for mobile phones are expected to be the first large-scale consumer applications to be implemented. In the medium to long term, satellite internet will converge with ground-based 5G/6G networks to build a truly integrated information network between space and earth. Space computing power triggers a new wave of enthusiasm. Recently, space computing has become a new high ground that global technology companies are competing for, with startup companies in the United States such as StarCloud, the European Union, Google, SpaceX, Amazon, and others intensively disclosing their space computing construction plans. Space computing power is not only a choice for technological development, but also a key factor in ensuring China's proactive position in the new round of technological competition and industrial transformation. Many commercial aerospace companies have initiated IPO consultations. Many commercial aerospace companies such as Blue Arrow Space, China Aerospace Science and Technology Corporation, Tianbing Technology, Star River Power, Interstellar Honor, Micro-Nano Aerospace, Yixin Aerospace, Asda Aerospace, and others have initiated IPO consultations. The institutional innovation of the sci-tech innovation board further guides "patient capital" to focus on key technology sectors, injecting long-lasting momentum into the industry. In the short to medium term, it is recommended to pay attention to the following areas: Listed companies in the satellite manufacturing and satellite internet sectors. After the acceleration phase of satellite projects like the Xingwang Project and the Qianxing Constellation, the continuous catalyst of launch events may bring about structural opportunities for the satellite sector to rise. Listed companies with business intersections in strategic emerging industries such as intelligent driving, low-earth economy, and artificial intelligence. Intelligent driving, low-earth economy, artificial intelligence, and the commercial aerospace industry have many intersections in multiple midstream and upstream areas, such as high-reliability integrated circuits, inertial navigation, radar, satellite high-precision navigation, satellite special remote sensing applications, etc. The focus on related listed companies with layouts in the military-civilian sector is expected to continue to rise. Listed companies that may receive special premium brought about by market value management expectations. With the frequent introduction of policies supporting mergers and acquisitions and market value management of listed companies, some listed companies in the commercial aerospace industry may engage in market value management through mergers and acquisitions (around extending the industrial chain, expanding the second curve, and technological innovation, etc.) or strengthening market expectation management through enhanced communication with investors. This is expected to bring more special premiums to the relevant listed companies. Risk Alert Macro-economic fluctuations may impact other civilian businesses of the enterprise, and fluctuations in downstream demand in the commercial aerospace sector may result in unexpected delays in equipment procurement. There may be uncertainties in the research and development, qualification, and batch production progress of some commercial aerospace equipment, which may affect the overall market growth rate. Exploration in some application areas of commercial aerospace is still in the early stages, and there may be mismatches between demand and supply sides of the industry, leading to incomplete commercial models. Fluctuations in raw material prices may lead to increased costs; with the reform of the pricing mechanism for military products, and the increase in orders, the performance of some companies may suffer after price reductions in some military products. The industry is highly prosperous, but if there is excessive growth in the short term, there may be periods where performance and valuation do not match up.