Discussions related to commercial aerospace are heating up. The commercial aerospace industry holds high strategic importance, broad industrial synergy, and strong economic benefits, playing a significant role in technological advancement and economic development. As an emerging sector, it also provides investors with new investment opportunities.

What is Commercial Aerospace?

Commercial aerospace refers to space activities that are market-driven and operate under a commercial profit model. It encompasses various aspects such as satellite launches, space tourism, and space resource development. Its core objective is to reduce the cost of space exploration and enhance the accessibility of aerospace technology through innovative technologies and business models.

Specifically, commercial aerospace operates in multiple ways, primarily including communications, remote sensing, and navigation positioning. For example, communication satellites provide global voice and data transmission services; remote sensing satellites observe the Earth's surface, offering data support for industries like agriculture and environmental monitoring; and navigation satellites provide positioning and navigation services for various vehicles. Additionally, some commercial aerospace companies are exploring emerging fields such as space tourism and space infrastructure construction.

Why Develop Commercial Aerospace?

From an industrial chain perspective, the upstream of the commercial aerospace industry includes material and component suppliers, the midstream comprises satellite and rocket manufacturers and launch service providers, and the downstream includes satellite operation services, ground equipment manufacturing, and end-users. Each segment has its professional requirements and technical standards, forming a highly complex and interdependent industrial network.

Among these, the construction and upgrading of launch site infrastructure, satellite manufacturing and launches, and ground station construction are becoming increasingly critical. For instance, launch sites, as foundational infrastructure for commercial aerospace, must provide services such as spacecraft assembly, storage, testing, and launching. With the advancement of projects like low Earth orbit (LEO) satellite constellations, demand for launch sites is growing, prompting countries to increase investments and enhance the scale and efficiency of launch facilities.

As a vital component of the aerospace sector, commercial aerospace positively drives technological innovation, economic growth, national security, and more. Its strategic importance continues to rise, offering vast development potential. According to data from the China Business Industry Research Institute, China's commercial aerospace market grew from ¥0.8 trillion in 2019 to ¥1.9 trillion in 2023, with a compound annual growth rate (CAGR) of 23.3%. In 2024, the market is expected to maintain rapid growth, reaching ¥2.3 trillion.

How to Seize Investment Opportunities in Commercial Aerospace?

Commercial aerospace falls under the high-end manufacturing sector, with rapid technological breakthroughs and industrial progress, making stock selection challenging. For ordinary investors, index investing is a relatively convenient option. Indices such as the CSI Defense Industry Index and the CSI Equipment Industry Index cover the commercial aerospace sector.

The CSI Defense Industry Index consists of stocks from companies primarily engaged in defense-related businesses. In terms of CSI secondary industry distribution, aerospace and defense account for the largest weight in the index at 54%. The CSI Equipment Industry Index comprises equipment industry stocks from the CSI 800 Index, with power equipment, machinery manufacturing, and aerospace and defense as the top three weighted sectors. Among these, aerospace and defense account for 13% of the index's weight.

Currently, both indices are at historically relatively low valuation levels. Wind data shows that as of June 12, the trailing P/E ratios of the CSI Defense Industry Index and the CSI Equipment Industry Index were 55.5x and 23.3x, respectively, with valuations around the 20th percentile since their inception.