Guosen: In the future, the passenger volume and fleet of the aviation industry will double. We will focus on developing domestic alternatives and autonomous control.

Guosen's research report states that in the next twenty years, it is estimated that China will have 9,736 aircraft delivered to the market, with a market size of $1.4789 trillion, accounting for 21.2% of the global aviation market. On the supply side, COMAC is accelerating production capacity release through the expansion of final assembly bases and the promotion of domestic engine development. On the demand side, the total number of C919 orders has exceeded 1,500 aircraft, with a total confirmed order value of nearly $100 billion, providing ample support for COMAC's production capacity ramp-up. The localization of large aircraft is about to break through, and the bank focuses on upstream companies in the large aircraft industry chain that are certified by COMAC and embedded in the core supply chain, as well as emphasizing the logic of localization substitution and the direction of orders with certainty. Guosen's main points are as follows: The global civil aviation market is emerging from the shadow of the pandemic, and China's aviation market has become a trillion-dollar core growth point 1) The global civil aviation industry has basically returned to normal levels of operation, and future passenger traffic and fleets will grow in tandem. The global air passenger turnover volume is expected to achieve an annual growth rate of 4.73%, reaching 2.52 times the level in 2024 by 2044. 2) In the next twenty years, China's aviation market size will reach $1.4 trillion, with narrow-body passenger aircraft taking the lead. In the next twenty years, it is estimated that China will have 9,736 aircraft delivered to the market, with a market size of $1.4789 trillion, accounting for 21.2% of the global aviation market; in terms of aircraft deliveries, single-aisle passenger aircraft are expected to account for 7,250 deliveries, or 74.46% of total deliveries. Supply side "climbing the hill," demand side "expansion inside and outside" 1) Supply side: By the end of 2025, a total of 30 C919s will have been delivered, and production capacity remains a core constraint on deliveries. COMAC is accelerating production capacity release through the expansion of final assembly bases and the promotion of domestic engine development to meet the critical year of production capacity ramp-up in 2026, with an expected delivery of no less than 28 aircraft. 2) Demand side: The total number of C919 orders has exceeded 1,500 aircraft, with a total confirmed order value of nearly $100 billion, providing ample support for COMAC's production capacity ramp-up. The localization rate of large aircraft is about to break through, and "upstream" companies enjoy dividends 1) Materials and components: The usage of composite materials in large aircraft is increasing generation by generation, with composites accounting for 12% of the C919 and an expected 51% for the C929, with T300 and T800 as the main grades; the use of domestically produced aluminum materials in metal materials exceeds 50%, achieving basic self-sufficiency, with the increased use of a new generation of aluminum-lithium alloys accounting for 7.4% of the structure weight, having broad prospects for domestic substitution, while titanium alloys are increasing in usage due to their performance advantages. 2) Aircraft as a whole: The value of the fuselage structure accounts for about 30%-35% of the total aircraft, achieving basic domestic substitution, and directly benefiting from the strongest certainty of capacity expansion; the value of aircraft engines accounts for 20%-25% of the total, with the civil aviation engine market size exceeding $2 trillion in the next twenty years, with turbine blades and other high-temperature components having the highest value proportion within the overall engine; currently, the development of the domestic aircraft engine CJ-1000 is progressing smoothly, and domestic substitution is entering the countdown; the value of onboard systems accounts for about 25%-30% of the total, mainly through "Sino-foreign joint ventures" for development, which is a key link in increasing localization rate. Key Focus 1) Pay close attention to high-quality upstream companies in the large aircraft industry chain that are certified by COMAC and embedded in the core supply chain, as these companies will directly benefit from the production capacity ramp-up of large aircraft, such as in the areas of high-temperature alloys for engines, composite materials and metal alloys for fuselages, and core casting and forging parts. 2) Emphasize the logic of localization substitution and the direction of orders with certainty, such as manufacturing of fuselage structures benefiting from volume increase dividends, and engines benefiting from the substitution of domestic aircraft engines, etc.