Forging is the key to the development of high-end equipment and the symbol of national comprehensive strength. After more than 70 years of exploration and tempering, China’s forging technology has grown from scratch, from small to large, from weak to strong, completed the historic transformation from a small forging country to a large forging country, and is now moving towards a powerful forging country. We expect that with the large volume of military aircraft and the rapid development of domestic large aircraft, the forging industry will usher in a golden period of development. Therefore, we launched a series of reports on “great power and heavy goods”, deeply combing the historical development context of forging technology, downstream demand and space calculation, competitive barriers and pattern analysis, and exploring the great investment opportunities of forging industry from the perspective of industrial evolution.
After mankind entered the industrial age, forging has become a technology that must be competed by big countries. 1) The forging industry has a long history and originated from the “Iron Age”: compared with casting and other machining processes, forging conforms to the requirements of the new generation of fighter aircraft, large transport aircraft and other high-end equipment for lightweight and high strength. It is the key and bottleneck of the development of a country’s high-end equipment. 2) After World War II, the world powers represented by the United States, the Soviet Union, Germany and France successively launched the competition of forging equipment. 3) China’s forging industry started late and developed rapidly. At present, the equipment level ranks among the world’s advanced level: the world’s largest 80000 ton die forging hydraulic press has been put into operation and has the capacity to produce 160000 ton die forging hydraulic press, which is more than twice that of Russia’s 75000 tons and more than 3.5 times that of the United States’s 45000 tons.
The forging industry is growing fast with good policies, and will rise to a higher level during the 14th Five Year Plan period. 1) During the 13th Five Year Plan period, the output of China’s forging industry increased significantly, and the compound growth rate of the output of die forgings, automobile die forgings, free forgings and ring forgings reached 8.08/6.78/8.7/14.4% respectively. 2) Forging products are initially high-end, equipment is large-scale, automatic, digital and information-based, and key technologies and processes are further developed. 3) China has issued a series of policies to benefit the forging industry. In 2021, the State Council issued the outline of the 14th five year plan and the long-term objectives for 2035, emphasizing the need to speed up the completion of bottlenecks such as the industrial technology foundation of basic processes such as forging. 4) Benefiting from the “14th five year plan” strategic change and the rapid development of domestic large aircraft, the forging industry is completing the transformation of high-end and mass production, especially aviation forging.
China’s forging industry has broad prospects, and Aerospace will give birth to a 100 billion forging Market. 1) Aviation: as a key part, the value of forgings accounts for about 6% / 15% of the aircraft fuselage and engine; Benefiting from the iterative and large volume of military aircraft + the delivery date of domestic large aircraft + aviation international subcontracting, combined with the prediction of World Airport 2022 and COMAC, the market demand for military aircraft fuselage and aeroengine forgings will be about 159.3 billion yuan / 209.1 billion yuan from 2022 to 2031; The civil aircraft fuselage and aviation engine forgings will bring 136.8 billion yuan / 114 billion yuan of market space respectively. 2) Aerospace: from 2012 to 2021, the number of launch vehicles launched by China reached a compound growth rate of 12.53%, surpassing the United States to the first in the world in 2021. We expect that navigation satellites, earth observation satellites and communication satellites will be launched 31 / 386 / 375 times by 2031, which will comprehensively boost the continuous growth of aerospace forging industry. 3) Ships: China Cssc Holdings Limited(600150) manufacturing industry took the lead in recovering in 2020 and became an important potential driver for the growth of ship forging. 4) Power: under the background of “double carbon”, the large-scale application of wind power and gas power will further broaden the market space of power forging.
Forging industry has high barriers, and the strong will always be strong. 1) Market barriers: the forging industry is located in the middle of the industrial chain and complies with the long development cycle of downstream high-end equipment. The forging industry has the color of long-term “customization”; 2) Capital Barrier: the forging industry is a typical capital intensive and equipment intensive industry. At the same time, the material cost reaches more than 70% of the operating cost, and the requirements for capital turnover are high. 3) Technical barriers: the raw materials in the forging industry are mostly difficult to deform materials, which put forward high requirements for product performance, service life and reliability, and must have advanced technology. 4) Qualification barrier: participating in military forging must undergo strict comprehensive evaluation and obtain military supporting qualification. It takes at least 4-6 years from obtaining qualification to performance.
Core beneficiaries: 1) Avic Heavy Machinery Co.Ltd(600765) : Aviation forging leader, benefiting from the increased demand for airframe and aviation engine forging. 2) Wuxi Paike New Materials Technology Co.Ltd(605123) : forging business covers a comprehensive range, and aviation and missile forgings grow rapidly. 3) Xi’An Triangle Defense Co.Ltd(300775) : it has 40000 tons of die forging hydraulic press, which fully benefits from the batch loading of fourth generation machines and large transport machines. 4) Guizhou Aviation Technical Development Co.Ltd(688239) : military civilian integration, domestic and foreign orders “two wings fly together”.
Risk tips: military expenditure does not meet expectations, military products business fluctuations, various risks caused by covid-19 epidemic, turbulence of international situation, risk of raw material supply and high concentration of suppliers.
