AVIC Securities released a research report saying that 2025 is the final year of the "14th Five-Year Plan", and the demand of the military industry is expected to be released in 2025. As the material basis of the military industry, military materials will benefit upstream enterprises in advance when the inflection point of the industry comes, showing higher performance flexibility. At the same time, judging from the recent large orders related to carbon fiber, the certainty of the industry is constantly recovering. At present, with the rapid development of weapons and equipment performance, the requirements for materials are not limited to a certain point of characteristics, and the requirements for the versatility of materials are constantly improving. The importance of composite materials in multifunctional materials is not only reflected in their material properties, but also in their composite versatility, so the proportion of composite materials in weapons and equipment is expected to continue to increase in the future.

At present, China has become the world's largest civil aircraft market outside the United States, and in the future, China is expected to become the world's largest single air transport market. The structural value of large passenger aircraft accounts for 30%-35%, and the market size will be more than 3 trillion yuan in the next 20 years, mainly airframe materials. At present, the body material of C919 is still mainly imported, and in the environment of domestic substitution, domestic material suppliers will fully benefit from the broad market of civil aircraft.

The main views of AVIC Securities are as follows:

Interpretation of important events in the military materials industry:

C919 deliveries have been accelerated, and material suppliers have benefited from domestic substitution

Shen Bo, deputy general manager of COMAC, said that the production capacity of C919 will reach 50 aircraft in 2025, and it is expected to reach 30 aircraft, while the C929 wide-body passenger aircraft is undergoing preliminary design and supplier selection work, and will soon enter the detailed design stage. The value of the fuselage structure of large passenger aircraft accounts for 30%-35%, which is mainly the fuselage material, the current C919 fuselage material is still mainly from imports, in the environment of domestic substitution, domestic material suppliers will fully benefit from the broad market of civil aircraft.

The first composite fan blade of Shangfa composite material rolled off the production line

The first composite fan blade of Shangfa Composites established by AVIC Composites and AECC Commercial Development Co., Ltd. successfully rolled off the production line, marking a major technological breakthrough in the field of aero engines. With excellent properties such as light weight, high strength and strong corrosion resistance, composite materials are gradually replacing traditional materials, and the proportion of application in the field of aviation manufacturing is gradually increasing.

In addition to civil aviation, with the rapid development of military weapons and equipment performance, the multi-functional requirements of materials are constantly improving, and the importance of composite materials in multifunctional materials is not only reflected in their material properties, but also in their composite multi-functionality. The R&D and application of composite materials will continue to play a key role in the evolving military technology and demand.

2024 performance forecast of military materials enterprises:

As of February 5, 13 military materials-related companies have announced their 2024 annual performance forecasts, and 1 has announced their performance reports, of which 5 companies have achieved growth in performance and 9 companies have experienced a year-on-year decline. On the whole, the median lower limit of net profit growth rate of listed companies that have released forecasts and express reports is -56.93%, and the median upper limit of growth rate is -45.72%. Among them, the performance of the pre-loss enterprises as a whole are generally subject to market demand adjustment, intensified competition, and fierce price competition, resulting in a decline in profits.

Interpretation of important events in the overseas military materials industry:

FirehawkAerospace, a U.S.-based developer of high-performance rocket engines, completed a Series C financing round and raised $60 million; In addition, FirestormLabs, an American 3D printing technology drone manufacturing company, was awarded a $100 million contract from the U.S. Air Force. The application of additive manufacturing process realizes the rapid manufacturing of complex structures, reduces production costs, and improves equipment performance and reliability. In addition to the application in the military field, with the increasing maturity of the cost control, large-scale production, product quality control, and technical level requirements of the additive manufacturing industry, it has also been rapidly expanded in the civilian field.

2025 military materials industry judgment outlook:

The military materials industry may take the lead in benefiting from the recovery of the industry

2025 is the final year of the "14th Five-Year Plan", and the demand of the military industry is expected to be released in 2025. As the material basis of the military industry, military materials will benefit upstream enterprises in advance when the inflection point of the industry comes, showing higher performance flexibility. At the same time, judging from the recent large orders related to carbon fiber, the certainty of the industry is constantly recovering.

Behind the price reduction, there is a trade-off between low cost and high reliability

The price reduction of military products is an objective law of increasing demand and the scale of production, and it is also the inevitable result of improving the efficiency of military expenditure and the country's low-cost procurement requirements. However, in the current environment of fluctuating demand, a certain degree of learning time has formed a trend between price reduction and product reliability, so based on the consideration of military safety requirements, in the absence of a significant improvement in demand, a continuous sharp decline is unsustainable and does not conform to the law of industrial product production. With the recovery of industry demand, exchanging volume for price is an important manifestation of the maturity of the military materials industry.

New opportunities brought by multi-flow flows

From the perspective of military production enterprises, in the current environment, military companies are constantly avoiding dependence on a single business field, a single customer, and a single model of equipment, reducing the risk of customer concentration, and preventing the impact of a certain business suspension on the business performance of the enterprise. In the future, the advantages of military channels will gradually weaken, and the advantages of product cost, technology, and quality will become the core competitiveness of enterprises. With the liberalization of channel barriers, new growth opportunities are being ushered in for some high-quality product supply enterprises.

The increasing versatility of materials requires composites to be a major concern

At present, with the rapid development of weapons and equipment performance, the requirements for materials are not limited to a certain point of characteristics, and the requirements for the versatility of materials are constantly improving. The importance of composite materials in multifunctional materials is not only reflected in their material properties, but also in their composite versatility, so the proportion of composite materials in weapons and equipment is expected to continue to increase in the future.

Additive manufacturing, special processing and other new processes of material manufacturing have ushered in rapid development

In terms of military applications, the application expansion of 3D printing additive manufacturing has entered a stage of rapid development, and it is developing from the previous rapid prototype to the actual batch production application of lightweight and customized parts. At the same time, led by Chaozhuo Hangke, the field of additive manufacturing, maintenance and repair has also developed rapidly. In addition, some new material special processing technologies, such as nanotechnology, plasma spraying, fused deposition, etc., are also expected to be more applied and developed with the continuous improvement of the performance requirements for weapons and equipment materials.

The new "civil" market for high-end materials is beginning to bring the second curve momentum

The "civil" market of high-end materials has brought the second growth momentum to enterprises. In addition to the rapid growth of military products, the maturity of material technology has also brought a broad "civilian" market to the industry, bringing a second growth momentum to related fields, such as carbon fiber in wind power, hydrogen energy storage and other new energy fields have shown good prospects; In terms of superalloys, with the maturity of technology, gas turbines are also expected to add development momentum to the superalloy market.

The low-altitude economy brings development opportunities for composite materials. The low-altitude economic industry has received full attention from the market in 2024, whether it is the UAV as the leading industry of the low-altitude economy, or the eVTOL that has become an important carrier of the low-altitude economy, it has high requirements for lightweight, miniaturization and high performance, so the application demand for carbon fiber composite materials can usher in a broad market space.

The domestic substitution market for "large aircraft" is broad. By the end of 2024, China Eastern Airlines, Air China, and China Southern Airlines have all put the C919 into commercial operation, and the three major airlines have received a total of 12 C919s. At present, China has become the world's largest civil aircraft market outside the United States, and in the future, China is expected to become the world's largest single air transport market. The structural value of large passenger aircraft accounts for 30%-35%, and the market size will be more than 3 trillion yuan in the next 20 years, mainly airframe materials. At present, the body material of C919 is still mainly imported, and in the environment of domestic substitution, domestic material suppliers will fully benefit from the broad market of civil aircraft.

It is recommended to pay attention to:

Guangwei Composite Materials (300699.SZ), Zhongfu Shenying (688295.SH), Zhongjian Technology (300777.SZ), Jialiqi (301586.SZ) (carbon fiber composite materials); Fushun Special Steel (600399.SH), Steel Research Institute Gaona (300034.SZ), Aviation Materials Co., Ltd. (688563.SH) (superalloy); Western Superconductor (688122.SH), Bao Ti Co., Ltd. (600456.SH), Western Materials (002149.SZ) (titanium alloy); BLT (688333.SH), Chaozhuo Hangke (688237.SH) (additive manufacturing); Huaqin Technology (688281.SH), Jiachi Technology (688708.SH) (stealth materials); North Mogaoke (002985.SZ) (carbon carbon composite).

Risk Warning:

fluctuating raw material prices, resulting in higher costs; the impact of military product price reduction on the gross profit margin of enterprises; macroeconomic fluctuations, which have an impact on the civilian business; Military procurement fell short of expectations.