According to the Futu Finance app, on August 28th, Air China and China Southern Airlines simultaneously received the first C919 aircraft at the COMAC final assembly plant in Pudong. This marks the beginning of a new phase of multi-user operation for the C919 aircraft.

The C919 large aircraft has received over 1,000 orders (including intentions). On September 28th, 2023, China Eastern Airlines purchased 100 C919 series aircraft from COMAC for a total of $9.9 billion and plans to deliver 5 aircraft in 2024. In April of this year, Air China and China Southern Airlines both signed agreements with COMAC to purchase 100 C919 aircraft, with deliveries scheduled from 2024 to 2031.

As of now, a total of 9 C919 aircraft have been delivered to customers. China Eastern Airlines' C919 aircraft has been in operation for 15 months since its inaugural commercial flight, flying 5 regular routes and completing over 3,600 commercial flights with a total flight time of 0.01 million hours.

Furthermore, on August 11th, it was reported that the European Union Aviation Safety Agency (EASA) gave positive feedback during on-site certification of the C919 aircraft in Shanghai last month. Chinese civil aviation authorities are optimistic about the C919 aircraft obtaining European Union certification by 2025. Currently, the C919 aircraft is in the third stage of the four-stage certification process with EASA, and based on the China-EU Civil Aviation Safety Agreement signed in 2019, the C919's entry into the European Union may be expedited.

Considering the relatively optimistic prospects for obtaining European airworthiness certificates and the endorsement of orders for hundreds of large aircraft by the three major Chinese airlines, there is hope for further breakthroughs in domestic orders for large aircraft.

According to COMAC's forecast, China's civil aviation market is expected to receive 9,284 aircraft (22% of the global total) worth $1.46 trillion (23% of the global total) from 2022 to 2041. Among them, the demand for single-aisle jet aircraft corresponding to the C919 could reach 6,288 aircraft (67.7% of the domestic market) worth $749.3 billion (51% of the domestic market).

In addition to covering the previous R&D costs, the breakthrough of the order has a clear stimulating and upgrading effect on the big aircraft industry chain. Advanced materials and high-end equipment in the areas of big aircraft components, aircraft body manufacturing, avionics systems, and final assembly integration are expected to benefit from the continuous realization and growth of C919 orders.

In terms of investment recommendations, Zheshang Securities is bullish on advanced manufacturing links and supporting links, and pays attention to autonomous and controllable and domestic substitution links:

1) Body manufacturing: AVIC Xi’an Aircraft Industry Group (the largest body supplier of C919), AVIC Helicopter (C919 tail and flaps); pay attention to Zhonghang Electronic Measuring Instruments (C919 nose).

2) Power devices: AECC Aviation Power (engine matching), AECC Aero-engine Control (engine control system).

3) Airborne system: pay attention to AVIC Jonhon Optronic Technology (connector), Beijing Andawell Science & Technology Co., Ltd. (cabin equipment), AVIC Airborne Systems (airborne system), Nanjing Quanxin Cable Technology Co., Ltd. (cable), Hefei Jianghang Aircraft Equipment Co., Ltd. (environmental control system).

4) Parts: pay attention to AVIC Heavy Machinery (aerospace forging parts), Xi'an Triangle Defense Technology Co., Ltd. (forging + section assembly), Chengdu Ald Aviation Manufacturing Corporation (parts), Guanglian Aviation Industry (composite materials tooling + parts).

5) New materials: pay attention to AVIC Aviation High-Technology Corporation (composite prepreg), China Composite Group (civilian carbon fiber), Fushun Special Steel Co., Ltd. (ultra-high-strength steel), Baoji Titanium Industry Co., Ltd. (titanium alloy), Western Superconducting Technologies Co., Ltd. (titanium alloy).

Related concept stocks:

AVIC is the only manufacturer in China that produces helicopters on a large scale and is also one of the main airplane manufacturers. Its main aviation products include various types of helicopters, trainers, general-purpose aircraft, aviation components, aviation electronic products, and accessories. Among the enterprises under AVIC Holdings, Jiangxi Hongdu Aviation Industry, Avicopter plc, AVIC Electronics, and Tianjin Aviation have all participated in the production of components for the C919 passenger plane. For example, AVIC Electronics has participated in the development and production of the C919 control board assembly, dimming control system, and integrated circuit breaker board, and is a systems-level supplier for the C919. Hongdu Aviation is responsible for the production of the front fuselage, mid-rear fuselage, and corresponding door sections of the C919 passenger plane.

Aluminum Corporation of China (Chalco) is a leading comprehensive aluminum company in the world nonferrous metals industry. Its member unit, Southwest Aluminum, is the first aluminum material production company in China that has been listed as a supplier of Commercial Aircraft Corporation of China (COMAC), and it is also the only company in China that can produce aluminum-potassium alloy materials.

AVIC Xi'an Aircraft Industry Group (000768.SZ): The company is mainly engaged in the research and development, batch production, maintenance and service of large and medium-sized aircraft, as well as aerospace components and other aviation products. It undertakes the design, manufacturing, supporting, and service of body components for large and medium-sized civil aircraft such as C919, ARJ21, and AG600, and has long-term and stable cooperation relationships. The company has the full-process closed-loop manufacturing capability from raw material procurement, manufacturing, testing, final assembly to delivery, and undertakes the manufacturing of various large and complex major components. As a supplier of C919 body structure, AVIC Xi'an Aircraft Industry Group is responsible for manufacturing tasks such as outer wing box and center fuselage (including center wing).