CMSC: National Strategy and Industrial Trends Resonate, Bullish on Commercial Aerospace Investment Opportunities in 2026.

CMSC released a research report stating that the commercial aerospace industry in China is a strategic emerging industry resonating with national strategies and industrial trends. It is expected to see intensive catalysis in 2026, including the validation of reusable rocket technology and progress in the IPO of commercial aerospace companies. The short-term outlook for the industry is positive, with investment opportunities in the "rocket supply chain with supply gaps." In the long term, there are investment opportunities in "rocket manufacturers with business model advantages" and "satellite industry chains with product inflation attributes." Key points from CMSC: Industry status: The core bottleneck lies in capacity, and the supply chain may benefit first The commercial aerospace industry in China was established in 2015 and has developed for ten years, establishing a complete industry chain consisting of three core elements: satellites, rockets, and launch sites, gradually extending to measurement and control and applications. The fundamental contradiction in the industry is the severe "capacity shortage," with rocket launch capability being the core bottleneck restricting the industry's scale development. In 2025, a total of 323 orbital-class rocket launches were conducted globally, with the U.S. conducting 193 launches (SpaceX 165 launches) and China conducting 92 launches (Long March series 69 launches). The U.S. leads temporarily, with China in second place, and the commercialization of U.S. rockets accounts for 82% of the total, with rocket total capacity being about 10 times that of China. Therefore, solving the capacity bottleneck is key to activating the commercial aerospace industry in China, with high certainty for the benefit of the rocket supply chain. Rocket segment: Focus on advances in reusable technology, potential for business model upgrades The key to improving commercial aerospace capacity lies in the technology of reusable rockets, which can transform rocket hardware from "disposable consumables" to "reusable assets," significantly reducing launch costs and increasing launch frequency and total payload: 1) Technically, the U.S. SpaceX's main rocket Falcon 9 successfully completed vertical landing and reuse of first-stages in 2015, and by 2025, it had achieved reuse 32 times. China only began the first launch of reusable rockets in 2025. 2) In terms of cost, Falcon 9 launch costs around $18,000/kg, while Ariane 5 costs around $85,000/kg. The unit payload cost reduction due to reusable technology is about 4-5 times. Considering that China's reusable rockets are expected to undergo intensive launch verification in 2026, breakthroughs in technology could lead to a surge in the development of the domestic commercial aerospace industry. In the long term, the focus of rocket manufacturers' business models is expected to shift from rocket research and manufacturing to launch operations, becoming a profitable and efficient niche in the industry. Satellite segment: Significant long-term inflation attributes, vast market space According to JSR statistics, as of now, SpaceX has launched a total of 10,955 satellites, with a future plan of around 42,000. China's GW satellite constellation has launched 174 satellites, with a future plan of about 13,000. Shanghai's G60 satellite constellation has launched 108 satellites, with a future plan of about 15,000. According to the ITU website, by the end of December 2025, China officially submitted frequency and orbit resource applications for an additional 203,000 satellites (19.3 thousand satellite applications from the RadioInnov Institute), covering 14 satellite constellations (including MEO satellites), making it the largest single international frequency and orbital application in China. Currently, the global market share of satellite constellations is over 60%, while the development of China's China Spacesat network has just begun. Considering the large scale of China's satellite constellation plans, the release of outstanding growth potential for China Spacesat network is expected once the bottleneck of capacity is removed with breakthroughs in reusable rocket technology. Investment logic: Short-term positive outlook for capacity supply chain opportunities, long-term positive outlook for business model and inflation attribute opportunities 1) Short-term outlook: Capacity shortages limit development, with a focus on the rocket supply chain that will benefit first. Taking Falcon 9 as an example, the total cost per rocket is around $45 million, and in terms of the overall structure, the first-stage, second-stage, and fairing costs account for about 67%, 22%, and 11% respectively. In terms of core components, the engine and structural components account for 43% and 33%, respectively, with the first-stage and engine being high-value parts. Recommendations for investment include: 1) Investment opportunities in the increased penetration of 3D printing manufacturing processes, including shovel stocks (covered by military group) such as Xi'an Bright Laser Technologies, Farsoon Technologies, service providers such as Gaona Aero Material (participating in Steel Research Aurora) (covered by metal group), Yinbang Clad Material (participating in Feier Kang) (covered by metal group), etc.; 2) Investment opportunities in high-barrier rocket body materials, including suppliers of thrust chamber interior wall materials, such as Shaanxi Sirui Advanced Materials (covered by metal group), and niobium tungsten nozzle materials suppliers, such as Western Metal Materials (controlling Xino Rare Metals) (covered by metal group); 3) Investment opportunities in high-quality rocket structural components, including Essence Fastening Systems (covered by automotive group), Guanglian Aviation Industry (planned acquisition of Tianjin Yuefeng) (covered by military group), etc. 2) Long-term outlook: After breakthroughs in reusable technology, a positive outlook for rocket manufacturers and the satellite industry chain. 1) The report believes that reusable technology will bring about a change in the business model of rocket manufacturers, with the focus shifting from rocket research and manufacturing to launch operations, becoming a profitable and efficient niche in the industry. Recommendations include: potential listings such as Blue Arrow Space (IPO has been accepted); 2) The report believes that once the capacity bottleneck is broken through, rapid growth in satellite demand will follow. Satellites are a niche area with long-term inflation attributes, and recommendations include: China Satellite Communications (covered by communications group), China Spacesat (covered by military group), etc. Risk warning: The progress of the domestic commercial aerospace industry may not meet expectations, and the listing process of commercial aerospace companies may also lag expectations.