In the best era of aviation equipment development, the main engine chain leader plays a leading role. The Fifth Plenary Session of the 19th CPC Central Committee first proposed to ensure the realization of the Centennial goal of building the army in 2007. The white paper “China’s national defense in the new era” puts forward the strategic requirements of “mobile operation, three-dimensional attack and defense”, “coastal defense, high-sea defense” and “integration of air and space, both attack and defense” for the three armed forces, and puts forward higher requirements for the military aircraft equipment of the three armed forces. China’s defense spending has increased steadily in recent years. The overall defense expenditure and its proportion in GDP are still significantly lower than that of the United States. There is a gap between the number of military aircraft and generations. The 14th Five Year Plan period will be the best time for the rapid development of aviation equipment. It is expected that the growth rate of aviation equipment cost will be greater than that of the overall equipment cost. As the core downstream of the aviation equipment industry chain, the main engine factory will play a leading role in the boom expansion of the industry chain.
The supporting facilities are becoming more and more mature, and the people join the army to give full play to the market vitality. Aviation industry is the focus of the in-depth development of military civilian integration. The aviation industry has formed a development pattern of “small core and large cooperation”. It has become the development trend of the industry for private enterprises to establish the whole process supporting relationship of “forging production – parts processing – component assembly”. The aviation industry has strengthened the integration of external industries, orderly liberalized non core manufacturing capabilities, and jointly created a number of aviation manufacturing agglomeration platforms with local governments and private enterprises such as Chengdu, Shenyang, Xi’an and Nanchang, so as to realize the centralized control and efficient coordination of socialized supporting facilities. State owned enterprises dominated by military central enterprises play a leading role in the industrial chain, the people’s participation in the Army gives full play to the market vitality, and the supporting support and supply capacity continue to improve.
Enlightenment from the development of Lockheed Martin company. The former Loma company, founded in 1912 and started from manufacturing aircraft, has grown into the world’s largest military manufacturing giant with four main businesses of aviation, aerospace, rotation and mission systems, missiles and fire control through several mergers and acquisitions in the past century. Under the sound R & D system, product models in many fields have maintained the world’s leading level, and the revenue growth of the core model procurement and maintenance support company has exceeded the fluctuation of the U.S. military cost cycle. Drawing on the development track of Loma company, the core assets of China’s military aircraft assembly have been listed one after another, the R & D capacity of listed entities has been continuously strengthened, and the development process of new models has been accelerated. The large volume of core models will promote the performance growth of main engine manufacturers and is a strong force leading the development of aviation equipment industry chain β； At the same time, it is expected to obtain high-quality institutes and asset injection, and increase the performance flexibility space under the scale improvement α。
Focus on the listing platforms of the four main engine manufacturers. The development and final assembly of Chinese military aircraft are led by AVIC. After several rounds of core asset injection and integration, four platforms of listed companies Avic Shenyang Aircraft Company Limited(600760) , Avic Xi’An Aircraft Industry Group Company Ltd(000768) , Avicopter Plc(600038) and Jiangxi Hongdu Aviation Industry Co.Ltd(600316) have been formed Avic Shenyang Aircraft Company Limited(600760) as the cradle of Chinese fighter planes, advanced fighter planes and carrier based aircraft have made great efforts, with steady operation and rising profit margin Avic Xi’An Aircraft Industry Group Company Ltd(000768) focuses on the business of large and medium-sized military and civilian aircraft. In recent years, the operation efficiency has been continuously improved and the effect of cost control has been shown Avicopter Plc(600038) is a leading manufacturer of helicopters in China. The success of zhi20 represents the highest level in China’s helicopter field, and the train loading is expected to be large Jiangxi Hongdu Aviation Industry Co.Ltd(600316) put the missile business of Hongdu group into operation in 2019, forming a dual main business pattern of trainer and missile, and the growth can be expected.
Risk warning: the risk of repeated epidemic affecting the macroeconomic environment; Risk that the development progress of new models is less than expected; Military trade business is difficult to get out of the risk of the impact of the epidemic in the short term.
