(Report producer/author: Zheshang Securities, Qiu Shiliang, Wang Huajun, Chen Chen)
1 Drones: Transforming the role of war, a weapon of modern warfare
1.1 The concept of UAV, military and civilian application scenarios continue to expand
UAV refers to a new type of aircraft that has no pilot, can carry mission load, can be reused, and is mainly controlled by radio remote control or its own program. Compared with traditional manned aircraft, UAVs have the advantages of small size, light weight, cheap cost, flexible marshalling, and low requirements for the combat environment, and have shown great military value in actual combat such as the war on terrorism, the Nagorno-Karabakh war, and the Russian-Ukrainian conflict, and have become an important role in the stage of land, sea, and air warfare in the 21st century. According to the "Introduction to Unmanned Aerial Systems," the unmanned aerial vehicle system is composed of a flight platform, a power unit, an avionics system, a mission load system, a ground system, and an integrated support system, of which the flight platform is the main body of the unmanned aerial vehicle system.
According to the use of UAVs, it can be divided into military UAVs and civilian UAVs. 1) Military UAVs can be divided into single-purpose UAVs and multi-purpose UAVs according to their combat use; single-purpose UAVs can be divided into reconnaissance aircraft, fighter planes, electronic jamming aircraft, and communication relay UAVs according to their tasks; and multi-purpose UAVs mainly refer to integrated UAVs for reconnaissance and fighting. 2) Civil unmanned aircraft can be divided into industrial-grade drones and consumer-grade drones, industrial-grade drones can be applied in meteorology, monitoring, agriculture, communications, security management and other fields, consumer drones are mainly used in aerial photography and other entertainment consumption fields.
The world's major military powers attach great importance to systematically promoting the building of new and high-quality combat forces in new domains and regard them as an important starting point for seizing the dominance of intelligent high-end warfare. The combat scenarios faced by the armies of the world are complex and diverse, and it is difficult for a single reconnaissance plane and reconnaissance satellite system to meet the needs of reconnaissance; and as all countries pay more and more attention to casualties and the living environment of manned aircraft becomes worse and worse, the armed forces of all countries urgently need equipment that effectively fulfills high-risk tasks, has zero casualties, and has a high reuse rate. Compared with manned aircraft, military UAVs have great advantages in concealment, cost, platform adaptability, flight environment adaptability, casualties, and endurance time. Because military UAVs do not need to consider the influence factors of pilots, they can be completely task-oriented in design, and speed, altitude, range, maneuverability, and endurance can break through human physiological limits. Since the Vietnam War was first applied to wars, it has performed well in the Afghan War, the Gulf War, and the Russian-Ukrainian conflict, and has been favored by the military.
1.2 The evolution of UAVs, from target aircraft to new military combat equipment
The original purpose of the drone was as a target aircraft. The concept of the UAV was proposed in 1914 by the British Kader and Pichel during World War I, and was first developed successfully in 1917, but it was not until the early 50s of the 20th century that it received real application. At that time, UAVs were mainly used as target aircraft. (A target aircraft is a military aircraft that is used as a shooting training target.) This type of aircraft uses remote control or pre-set flight paths and patterns to simulate enemy aircraft or incoming missiles during military exercises or weapon test firing, providing imaginary targets and firing opportunities for various types of artillery or missile systems. UAVs are gradually expanding their military use. After World War II, the United States expanded UAVs from training to actual combat and continued to emerge on the battlefield; Israel's successful use of drones to complete military missions in the Middle East has changed the world's understanding of the status of drone warfare. With the advancement of electronic information technology and power plant technology, the functions of UAVs on the battlefield have shown a diversified trend, from the initial target aircraft and suicide bombs, gradually expanding to military functions such as reconnaissance, intelligence collection, tracking, communication and autonomous attack.
Drone battlefield roles are gradually enriched. UAVs have been derived from many categories, including target aircraft, reconnaissance UAVs, attack UAVs, communications UAVs, and reconnaissance and combat integrated UAVs. The types of UAVs have increased, and models with the characteristics of specialization, multi-function, intelligence, high reliability, and ease of use have been put into the battlefield one after another to meet more combat needs, and the battlefield role of UAVs has gradually been enriched.
The expendable nature of drones is constantly strengthened. According to CCTV news reports, on January 14, 2023, the Israeli intelligence agency Mossad released a report on the loss of equipment for the Russian-Ukrainian conflict, Russia lost a total of 200 drones and Ukraine lost 2,750 drones. According to Ukrainian news reports, from February 24, 2022 to August 7, 2023, Russia lost 4,154 drones and 28 new single-day losses. Under the modern war represented by the Russian-Ukrainian conflict, UAVs have become the main equipment force, and the consumption is much greater than that of fixed-wing aircraft and helicopters, and the consumable attributes are outstanding.
1.3 Development of foreign UAVs: the US military has a large number of equipment and an advanced European industrial system
The US military's UAV deployment is wide-branched, and the number of UAV equipment has exceeded 1,000. According to the report "The Military Balance 2023" of the British International Institute for Strategic Studies, the US military is equipped with more than 1,000 drones, including 416 army equipment, 237 air force instructor and training department equipment, 114 air force equipment, and 100 marine corps equipment. The US military UAVs are mainly heavy UAVs, reconnaissance UAVs and reconnaissance and combat integrated UAVs. 1) According to the weight dimension statistics, UAVs can be divided into heavy (greater than 600kg), medium (150-600kg) and light (20-150kg) three categories, the proportion of US military heavy UAVs is 57%, medium UAVs 26%, small UAVs 17%; 2) According to the statistics of combat function, the US military has 546 reconnaissance (ISR) UAVs, 490 reconnaissance and combat integrated (CISR) UAVs, and 28 transport (TPT) UAVs.
The US military is equipped with more than 20 models of UAVs, and the MQ-9A UAV is equipped with the most. According to the statistics of models, the main unmanned aircraft of the US military are equipped with 286 MQ-9A heavy reconnaissance and combat integrated UAVs, 236 RQ-7B medium reconnaissance UAVs, 204 MQ-1C heavy reconnaissance and combat integrated UAVs, and 100 BQM-147 light reconnaissance UAVs. Developed by the General Atomics Corporation of the United States, the MQ-9 UAV is a large-scale "reconnaissance and combat integration" UAV at medium and high altitudes with long endurance, which can carry out attack, intelligence collection, surveillance, and reconnaissance missions.
The United States is the first country in the world to develop and use ISR (Intelligence, Surveillance & Reconnaissance) unmanned aircraft system, the existing UAV has built a multi-level, multi-type UAV equipment technology system covering high, medium and low altitude, long, medium and short range, large, medium and small, strategy, tactics, attack, confrontation, etc., with more than 200 models of military drones. Its R&D and procurement spending accounts for more than two-thirds of the world's total spending on drones.
The US military has formulated a medium- and long-term UAV development plan to maintain global superiority. In 2018, the US Department of Defense published a Comprehensive Roadmap for Unmanned Aircraft Systems (2017-2042). The U.S. Department of Defense's vision for drone development can be summarized into four major areas: interoperability, autonomy, cybersecurity, and human-robot collaboration. It is expected that by 2042, the United States will integrate unmanned aerial systems, establish new combat modes and concepts, and base on the support capabilities of future system operations.
Israel has formed a relatively complete UAV system from long-endurance UAVs, tactical UAVs to attack UAVs, representative models are Heron and Seeker UAVs. Israel is a developed country in UAV technology. Since the 80s of the 20th century, the Israeli government has integrated domestic research and development resources to further enhance the research and development strength of drones, and since then, Israel has gradually moved towards a drone development power. Israeli UAVs focus on practicality and practicality, determined entirely according to Israel's own needs. Emphasize innovation and highlight the advantages of equipment.
The UAV industry is the most important direction of activity in Russia and will invest 1 trillion rubles. In 2012, Putin declared that "it is necessary to give strategic attention to the development and production of UAVs." Under the support of the policy, the Russian drone industry has started explosive growth. Between 2009 and 2015, Russia successfully developed a number of micro-small reconnaissance UAVs; Since 2015, medium-sized unmanned aerial vehicles have begun test flights, breaking through the passive situation that Russian UAVs have reconnaissance capabilities but no attack capabilities, and in 2021, the Russian army disclosed for the first time the picture of the actual combat of Russian "Orion" UAVs in Syria. In April 2023, according to the Russian satellite news agency, Putin said that there is potential for development in the field of UAVs, it should be one step ahead of competitors, and promising UAVs should be produced on an assembly line. The UAV industry is the most important direction of activity in Russia and is very promising, and future investments in this area will amount to 1 trillion rubles. Russia plans to produce 18,000 drones per year by the end of 2026 and 32,000 by 2030, meeting a level of about 70% of demand within Russia.
The British Raytheon UAV is currently the highest level of British UAVs. The Raytheon UAV adopts a flying wing layout and a low-detection composite material design to reduce the chance of detection by enemy radar in long-distance combat. Its use combines continuous detection, intelligence sharing, targeting, and strike missions. France joins the EU countries to develop advanced drones. The Neuron UAV is a demonstration and verification project of unmanned combat aircraft (UCAV) technology led by France and involving Sweden, Italy, Spain, Greece and Switzerland. The aircraft will have low detectability, a flying wing layout and heavy use of composite materials.
In general, UAVs in Western countries developed early and the industrial system matured. The UAV technology of the United States is ahead of other countries, and the UAV models are numerous and the performance is in the forefront of the world. Israel has formed a complete system of long-endurance UAVs, tactical UAVs, and attack unmanned aircraft. Russia vigorously developed UAVs after 2012. Britain's technology is still at the forefront of the world, and France has chosen to independently develop an industrial model of joint development of UAVs with other European countries.
1.4 Development of mainland UAV: Chada integrated UAV to create a business card made in China
Initial stage: establish the development and production capacity of unmanned target aircraft. China's military UAV construction began in the 50s of the last century, with the introduction of 20 La-17 and 10 updated MiG-15 unmanned target aircraft from the Soviet Union. In the 60s, China began independent UAV research and development, in 1962 developed China's first generation UAV B-1, in 1976 Nanjing University of Aeronautics and Astronautics developed the Changkong-1 unmanned target aircraft, and Beihang University developed the Changhong 1 UAV in 1979. At the end of the seventies, the mainland began to use UAVs in batches, mainly as target aircraft and jamming decoys for air defense systems, etc. Growth stage: the formation of unmanned reconnaissance aircraft development and production capacity. In the early eighties, the undetectable 5 UAV began to equip the troops one after another; At the end of the eighties, Vanguard UAVs were imported by Israel for artillery positioning and calibrated reconnaissance. While developing UAVs in institutions of higher learning, the mainland has set up a series of scientific research institutes led by large military enterprises to develop UAV technology, mainly including the Aviation Industry Group, the Aerospace Science and Technology Group, the Aerospace Science and Industry Group, and the China Electronics Science and Technology Group.
Comprehensive development stage: build the development and production capacity of reconnaissance and combat integrated UAV. At present, the performance of mainland military unmanned aerial vehicles has been comparable to the international advanced level. Military UAVs are typical representatives of high-tech, systematic and intensive, and the mainland has developed a variety of UAV products that integrate reconnaissance and fighting; the UAV products represented by the "Rainbow" and "Wing Loong" series have excellent performance and are welcomed by overseas markets and have become star products of UAV military trade.
2 UAV industry chain: new domain and new quality equipment field, strong industrial chain integrity
2.1 UAV high-tech gathers, combat functions are constantly upgraded
2.1.1 UAVs bring together many high-tech vehicles with high technical barriers
Military unmanned aerial systems incorporate many high technologies. As one of the most advanced equipment, military UAVs have applied a large number of the latest scientific and technological achievements, which are embodied in the following six aspects.
First, stealth technology. The development of a new generation of multi-purpose and stealthy UAVs has become a new focus of research and development for air forces around the world. The new stealth UAV formed by the combination of modern stealth technology and UAV technology is constantly improving its stealth performance, survivability, and combat initiative. UAV stealth technology mainly includes radar stealth, optoelectronic stealth, and acoustic stealth technology.
Second, flight control system technology. The flight control system is the brain of the UAV and belongs to the branch of the UAV avionics system. The flight control system is the core system of the whole process of UAV taking off, flying in the air, performing tasks, and returning to the field, which can control the flight attitude, course, speed, altitude and other parameters of the UAV, which plays a decisive role in the function and performance of the UAV, and is the basis for the UAV to achieve intelligent control.
Third, the power system. The powertrain consists of an engine and auxiliary systems. The core of the powertrain is the engine, known as the heart of the aircraft. Military UAVs often have mission characteristics such as high altitude and long endurance. In order to cope with the continuous expansion of UAV combat scenarios, UAV engines are also gradually upgraded. UAVs currently use piston engines, turbine engines, etc.
4. Communication and detection technology. To improve UAV communication capabilities, it is necessary to solve problems in antenna size and power. Reconnaissance is one of the most basic combat functions of UAVs, and most UAVs need to carry reconnaissance equipment, such as biochemical detectors, cameras and infrared detectors; Communication relay and emergency support are important combat applications of UAVs, and technologies such as high-precision encrypted communication and sensor miniaturization involved are important research and development directions for communication and detection technologies.
Fifth, electromagnetic interference and protection and other safety technologies. Electromagnetic interference is also the main method of electronic warfare, and it is one of the important application directions of UAVs in the US military and other Western countries to complete electromagnetic interference tasks independently or in coordination with other equipment. At the same time, electromagnetic interference is one of the main causes of UAV crashes, strengthening electromagnetic interference shielding technology, ensuring that the communication between the control base station and UAV is not interfered with, will effectively ensure the safety of UAV mission. The electromagnetic protection system of the drone includes a lightweight airborne protection chassis, interface and pulse protection module, FSS radome, RF front-end protector, body protection, etc.
Sixth, composite material technology. Because of its distinctive technical characteristics of low cost, light structure, high mobility, large overload, long range, and high stealth, UAVs have an urgent need to reduce the weight of the airframe structure. In order to reduce weight as much as possible, UAVs use a large number of composite materials, and the dosage is generally higher than that of manned fighters, generally between 60% ~ 80%. The application and development of composite materials on UAV airframes has gone through the development process from fairings, to small bearing components, to the main load-bearing structure, and then to the integrated molding of the airfoil box segment and wing-body fusion.
2.1.2 The combat function of UAVs has gradually improved, and it has changed to intelligence, unmanned and clustering
Unmanned combat is one of the preferred forms of warfare in the future. Along with the continuous interpretation and iteration of military battlefields, weapons and equipment are developing in the direction of informationization, intelligence, unmanned, and clustering. The use of relatively low-cost, comprehensive-loaded, and heterogeneous unmanned aerial vehicles to carry out cluster distributed operations will be the main form of confrontation between war and non-war in the future.
The development of military unmanned aerial vehicles mainly follows the track of "target aircraft-ISR-reconnaissance-combat integration-unmanned combat aircraft-air-space integration", and the following four development trajectories have been formed: 1) from low-altitude reconnaissance to high-altitude long-endurance development; 2) Development from a single reconnaissance to an integrated reconnaissance and unmanned combat aircraft; 3) the development of combat aircraft from ground attack to air superiority unmanned fighters; 4) From low-altitude and low-speed to high-altitude, high-speed, near-space hypersonic development.
Specifically, the development trend of military UAVs is mainly reflected in two aspects: combat function and combat mode. In the future, the degree of network operations and systematic operations in warfare will become higher and higher, centering on the two major functions of information support and firepower strike, UAVs will play an increasingly active role in proximity reconnaissance, electronic countermeasures, and fire penetration, and their combat functions will gradually be improved. From the perspective of combat methods, the emergence of over-the-horizon attack, long-endurance reconnaissance, manned/UAV coordinated operation, and swarm operation has enriched the combat concept of UAVs and also put forward higher requirements for UAV miniaturization and intelligence.
2.2 UAV industry chain: The integrity of the industrial chain is strong, and the mainland has opened up the UAV industry chain
The UAV industry chain is integrated from raw materials to final assembly, and the integrity of the industrial chain is strong. The upstream of the industrial chain is mainly composed of suppliers of raw materials, components and components; Midstream is an integrated supplier of UAV subsystems, including power systems, avionics systems, mission loads, ground systems and integrated support systems; The downstream is mainly the integration of the whole machine, with the participation of central enterprises and institutes, colleges and universities, and private enterprises.
2.2.1 Composites: play a key role in lightening, miniaturization and high performance of structures
Composite materials are new materials composed of two or more materials with different properties and forms through composite processes. On the basis of inheriting the main characteristics of the original material, the composite material can also overcome the defects of a single material and improve the overall performance through the composite effect. At present, the use of carbon fiber-based composite materials on UAVs accounts for about 60%~80% of the total mass of the structure, which plays a vital role in the lightening, miniaturization and high performance of the UAV structure. The main composite materials used by drones include carbon fiber composites, glass fiber composites and resin composites. The absorbing coating developed with carbon fiber composite material and the optimized design to reduce the reflection of electromagnetic waves in the shape of the fuselage using carbon fiber composite material.
Domestic listed companies engaged in the development and production of composite materials mainly include AVIC Hi-Tech, Guangwei Composite Materials, Zhongjian Technology, Zhongfu Shenying, etc., and the reinforcement materials of their composite products are mainly carbon fiber.
2.2.2 Power system: the heart of UAVs, the common development of central enterprises in the military industry and private enterprises
The powertrain refers to the engine and auxiliary devices, which are discussed here. UAV engines can be divided into turbofan engines, turbojet engines, piston engines, turboshaft engines and electric motors. At present, the propulsion equipment of mainland UAVs is mainly piston and gas turbine engines, and turbofan engines with low fuel consumption and high thrust can adapt to the needs of long endurance and high overload, which is the main development trend of UAV engines in the future.
Domestic suppliers of UAV propulsion devices include Hangfa Power, Zongshen Power, Beijing Power Machinery Research Institute, etc. Hangfa Power is a leading listed company in mainland military engines, and the AEF50E turbofan engine produced by its subsidiaries is used in domestic twin-engine cloud shadow UAV and Rainbow-6 UAV, AEF50E turbofan engine, AEP50E turboprop engine, AEF20E turbojet engine can be applied to three export UAVs. Zongshen Power is a leading enterprise of professional thermodynamic machinery in China, and its subsidiary Zongshen Hangfa provides power equipment for rotor, fixed-wing general aviation aircraft and UAVs, and the products C115 engine, C145 engine, aviation variable-distance propeller and other products have been used on 15 UAVs such as Wing Loong-1, Wing Loong-1D, Rainbow 3 and a variety of self-rotating wing manned aircraft, filling the gap of domestic aviation piston engines. Beijing Power Machinery Research Institute is the largest research and production unit for ramjet engines and turbo engines for bombs in mainland China, and has developed a variety of turbofan and turbojet engines, which are used in small flying missiles and unmanned aerial vehicles.
2.2.3 Avionics system: the brain of the drone, composed of flight control system, navigation system and other systems
The avionics system consists of flight control system, navigation system and other systems. The flight control system is the basis for the UAV to complete the combat mission, including both hardware and software. 1) In terms of hardware, it generally includes control computers, sensors, navigation equipment, actuators and other equipment. Functions include engine control, high-precision flight attitude control, ground control platform, data link communication and navigation, load control, etc. 2) In terms of software, it can be divided into program control (time program control), remote control (remote control command control through the ground station) and autonomous flight control (two-dimensional, three-dimensional or four-dimensional). The first two control methods are often used as flight control of target aircraft, observation and other types of UAVs, and in the remote control mode, ground operators control UAVs; The third type is commonly used for flight control of reconnaissance aircraft, attack aircraft, and other types of unmanned aircraft, and the flight control system can automatically control unmanned aerial vehicles. The navigation system is the "eyes" of the drone, and the combination of multiple technologies is the direction of future development. UAV on-board navigation system is mainly divided into two types: non-autonomous (satellite guidance) and autonomous (inertial guidance), but they have the disadvantages of being susceptible to interference and increasing error accumulation, while UAVs require navigation capabilities such as high precision, high reliability, and high anti-interference, and a navigation system combining a variety of navigation technologies will be the direction of future development.
The listed companies engaged in UAV avionics system business mainly include AVIC Electronics, Starnet Yuda, Sunrise Aviation, etc. Among them, AVIC Electronics' business covers airborne avionics systems, flight control systems, electromechanical systems and equipment, and is a leading enterprise in the airborne field of Continental Airlines.
2.2.4 Mission load: an important part of UAV combat equipment
Through information interaction with ground control stations, the mission load system of military UAVs can obtain target information, coordinate command/control, and complete combat tasks such as reconnaissance, air-to-air operations, and precision strikes. The mission load system includes reconnaissance and surveillance loads, communications loads, electronic countermeasures loads, target equipment loads, weapons and ammunition loads, and so on.
The listed companies engaged in UAV mission load system business mainly include Dali Technology, Guangdong Hongda, Aerospace Rainbow and so on. Dali Technology is one of the few high-tech enterprises in China with completely independent intellectual property rights and can independently develop and produce core components, movement components and complete industrial chains related to thermal imaging technology. The company has a variety of pod thermal imager series products for industrial UAVs, reconnaissance UAVs and helicopters and other equipment platforms, is an important supplier of UAV and missile infrared thermal imager. Guangdong Hongda is a domestic integrated service provider of mines and civil explosions, and its products include traditional ammunition products, intelligent ammunition products, and individual intelligent equipment. In January 2021, a product of the company's JK series successfully completed the drone hanging test at a shooting range. On the basis of the research and development of the whole UAV, Aerospace Rainbow has simultaneously developed small air-to-ground missiles represented by the Shooter-1 and the Shooter-2, giving play to the maximum synergistic effect of UAVs and ammunition, UAVs can provide a flight verification platform for the development of intelligent ammunition, and the large-scale application of ammunition can also quickly improve the improvement and development and performance of UAVs.
2.2.5 Assembly integration: The military industry central enterprise is the leader of the UAV industry chain
The integrated assembly of UAV assembly is mainly carried out by scientific research institutes, colleges and universities, and private enterprises under the central enterprises of the military industry. Military industrial enterprises and scientific research institutes have formed a series of products with their own characteristics, becoming the leading unit in the overall design and integrated assembly of mainland military UAVs, and undertaking the responsibility of the head of the military UAV industry chain. Relying on scientific research advantages and professional characteristics, colleges and universities have established companies specializing in UAV business, realizing the integrated development of production, education and research. Private enterprises joined the UAV industry chain from system suppliers, and the system business extended to the whole machine business after maturity. Listed companies in central enterprises include China Unmanned Aerial Vehicle, Aerospace Rainbow, and Aerospace Electronics, and listed private enterprises include Zongheng Shares, Star Network Yuda, and Guandian Defense.
China UAV is a leading enterprise in the field of large-scale fixed-wing long-endurance UAV in China. The company's Wing Loong series UAV system has become a business card of "Made in China", the company's main product Wing Loong series UAV system products and related technologies have won the Fifth China Industry Award Commendation Award, National Defense Science and Technology Progress Award First Prize, Second Prize, Third Prize and other awards. Aerospace Rainbow is a leading enterprise in the field of medium and large UAVs in China. Taking intelligent unmanned systematic combat as the traction, the company has developed medium and high-end unmanned equipment characterized by stealth, high speed, high altitude and ultra-long endurance, and independently developed more than 20 kinds of products such as rainbow series UAVs and shooter series air-to-surface missiles, and its performance indicators have reached the world-class level. Aerospace Electronics is a modern industrial chain length unit built by China Aerospace Science and Technology Corporation on the key areas of aerospace technology application industry, and is the overall unit of the development of UAV type spectrum projects of the whole army and the qualified supplier directory unit for centralized procurement of UAV systems; The "Feiteng" series of precision guidance products is the only overall unit of the Aerospace Science and Technology Group.
Tengdun Science and Technology is mainly engaged in the research and development, manufacturing, sales and operation service business of intelligent equipment represented by unmanned aerial vehicles, and its products are mainly "double-tailed scorpion", "flapping eagle" and other series of UAVs. Haiying Aviation is a holding subsidiary of the China Academy of Aerospace Science and Industry Flight Technology, and is the only UAV overall unit and UAV industry platform of China Aerospace Science and Industry Group Co., Ltd., focusing on UAV pre-research and innovation, UAV product development, production, testing and service. Seahawk Aviation's main business is military UAV, target aircraft, civil UAV and UAV commercial operation services, focusing on the development and application of high-end UAVs such as high-altitude and high-speed, reconnaissance and combat integration, and flying wing layout. Among them, China UAV, Aerospace Rainbow and Aerospace Electronics are the main listed companies of mainland military UAVs. Relying on the high-quality platform of central enterprises, the "Wing Loong," "Rainbow," and "Feihong" series of UAVs have been developed respectively. In 2022, the operating income of the drone business will be 27.7, 26.1 and 490 million yuan, respectively.
2.2.6 Value distribution: The purchase amount of finished products and airframes on board of UAVs accounts for a high proportion
The UAV production model is similar to that of manned aircraft. UAV complete machine factories are generally responsible for the design, research and development, production and manufacturing of UAV systems, and do not carry out production activities of raw materials such as airframes and finished accessories, so they need to purchase various raw materials required for the integration of UAV system assembly such as airborne finished products, airframes, ground stations, and comprehensive support equipment from suppliers. Airborne finished products include engines, synthetic aperture radars, pylons, aircraft management computers, satellite antenna combinations, optoelectronic monitoring/sighting devices, etc. The fuselage includes fuselage, wings, tail, landing gear and other structural parts. Ground stations include command and control stations, line-of-sight link ground stations, satellite and communications link ground stations and related products. Comprehensive support equipment includes body packing boxes, smooth shaft ground calibration instruments, and comprehensive testing equipment.
The highest proportion of the purchase amount of airborne finished products. According to the prospectus data of China UAV, it is estimated that the proportion of the purchase amount of each sub-system of the Wing Loong series UAV in the total procurement from 2019 to 2021 can be obtained: 57% of the airborne finished products, 16% of the airframe, 12% of the ground station, and 2% of the comprehensive support equipment.
3 UAV market space: The military market is growing steadily, and the demand for industrial-grade UAVs is strong
3.1 As a new domain and new quality equipment, UAVs continue to be promoted by policies
UAVs are an important part of intelligent, unmanned and long-range equipment, and continue to be promoted by policies. In recent years, relevant state departments have issued documents that have repeatedly mentioned the development of UAVs. We believe that with the promotion of policies, the mainland drone industry will enter a period of rapid development.
1) In 2016, the Central Military Commission issued the "Outline of the 13th Five-Year Plan for the Development of the Armed Forces", proposing to achieve major construction in informationization construction in 2020; 2) In 2017, the State Council issued the "New Generation of Artificial Intelligence Development Plan", which proposed to support the application of unmanned systems and industrial development, and included drones in the plan; 3) In 2018, the aviation industry released the "White Paper on the Development of Unmanned Aerial Vehicle Systems (2018)", and by 2025, the UAV system equipment system with high-end breakthroughs, complete systems and sound capability elements will be established; 4) In 2019, the State Council issued the White Paper on China's National Defense in the New Era, proposing to promote the rapid development of militarization and informatization and build an intelligent national defense army; 5) In October 2022, the State Council issued the "Report of the 20th National Congress", which will accelerate the development of unmanned intelligent combat forces. The policy frequently proposes to realize the remote, intelligent and unmanned weapons and guide the future development direction of national defense equipment, which will effectively promote the breakthrough of UAV-related technology and the rapid development of the military UAV industry. 6) In July 2023, the Ministry of Commerce, the General Administration of Customs, the State Administration of Science, Technology and Industry for National Defense, and the Equipment Development Department of the Central Military Commission issued an announcement on the implementation of temporary export control on some unmanned aircraft, deciding to implement temporary export control for specific unmanned aerial vehicles, which will be officially implemented from September 1, 2023, and the implementation period of temporary control will not exceed two years.
3.2 The military market continues to grow and is expected to reach a global market of $16.4 billion by 2032
The scale of the global military UAV market continues to rise, and the export momentum of mainland UAV arms trade is improving.
1) Global military UAV market: According to the forecast data of the Thiel Group report, the global military UAV market will continue to grow from 2023 to 2032, and the global military UAV market will reach $16.4 billion in 2032, with a compound growth rate of 3.44%; In terms of R&D expenses, global military UAV R&D expenses are expected to increase from US$6.4 billion in 2023 to US$7.8 billion in 2032, with a compound growth rate of 2.25%.
2) Proportion of military trade market share: According to SIPRI data from the Stockholm International Peace Research Institute, the total market share of China's UAV military trade in 2010~2020 accounted for about 17%, ranking third in the world, of which the main export models are "Rainbow" and "Wing Loong" UAVs. It is expected that the market share of mainland UAV military trade is expected to further increase in the future. At present, the only countries in the world with a complete industrial chain of UAVs are Israel, the United States and China.
3) Global drone market growth ranking: According to Drone Industry Insights data, the top three regions in the global drone market growth rate in 2022 are Asia, North America, and Europe, with growth rates of 11.9%, 8.1%, and 6.8%, respectively, and the Asian drone market continues to maintain a high boom.
China's steadily rising defense budget is expected to drive the rapid growth of China's military drone market. According to data from the US Department of Defense, in recent years, the US military unmanned aerial system procurement expenditure has stabilized at about $3 billion after a 21-22-year trough, accounting for about 0.3%-0.4% of the US defense budget. China's defense budget continues to maintain steady growth, exceeding 7% again in 2022, and China's defense budget in 2023 will be about 1,553.7 billion yuan. Assuming that China's UAV procurement expenditure accounts for 0.4% of the defense budget, it is estimated that the mainland's military UAV procurement expenditure will be about 6.2 billion yuan in 2023.
3.3 The application of the civilian market is gradually excavated, and the market demand for industrial-grade UAVs is strong
The application scenarios of civil UAVs are gradually explored, and the industrial-grade UAV market is expected to grow rapidly. With the gradual maturity of technology, superimposed on government policy support, the downstream application area of civil UAVs is gradually opened. At present, the main application scenarios of industrial-grade UAVs are agricultural plant protection, power inspection, aerial surveying and mapping, police security, environmental monitoring, railway construction, disaster rescue, etc., through the combination with big data, cloud computing and other technologies, industrial UAVs have moved from "vertical progress" to "horizontal progress".
According to data from China Business Intelligence Network, the most widely used field of industrial drones in China in 2020 is geographic surveying and mapping, accounting for 29%, followed by agriculture, forestry, plant protection, patrol inspection and other fields. China has a vast land area, as a big agricultural country, with the improvement of urbanization, the need for industrial drones has gradually increased. In addition, China is vigorously developing smart cities, and industrial drones are expected to improve the level of urban management with their platform-based, unmanned and intelligent characteristics. According to Frost & Sullivan data, China's industrial drone market will reach 320.8 billion yuan in 2024, and is expected to grow at a compound growth rate of 56% from 2020 to 2024.
4 Investment analysis
4.1 Space rainbow: UAVs and airborne weapons work in unison, and the military and civilian markets fly together
Aerospace Rainbow was listed in 2010, formerly known as Zhejiang Nanyang Electronic Film Co., Ltd., and completed major asset restructuring in 2017, becoming the first stock of China's military UAV, forming a development model of UAV and new material dual main business. Relying on the Aerospace and Pneumatic Institute, the company is the only unit in China that has both medium and large UAV and airborne weapons research and development capabilities. It has built a UAV application system combining far, medium and short range, high and low altitude, high speed and low speed, and its "Rainbow" series of UAV is the first UAV brand in China to achieve batch export. In 2022, the company achieved revenue of 3.858 billion yuan, a year-on-year increase of 32.4%, of which the drone business achieved revenue of 2.473 billion yuan, a year-on-year increase of 121.2%; The net profit attributable to the parent was 307 million yuan, a year-on-year increase of 34.8%. The drone business was the main driver of the company's growth.
4.2 Medium UAV: A leading enterprise of large-scale fixed-wing long-endurance UAV, Wing Loong creates a business card made in China
Medium UAV is a leading enterprise of large-scale fixed-wing long-endurance UAV. In June 2022, it was listed on the Science and Technology Innovation Board of the Shanghai Stock Exchange. The company focuses on large-scale fixed-wing long-endurance UAV system system, multi-scenario, full-life overall solutions. Relying on the high-quality platform of Chengfei Group, the company's Wing Loong series UAV system has become a business card of "Made in China", and its products and related technologies have won many national awards. The Wing Loong series of unmanned aerial systems have been exported to many countries along the "Belt and Road" and are the main models of the export of trade UAVs of the Continental Army. Driven by the UAV arms trade, the company's performance has grown rapidly. From 2019 to 2022, the company's operating income increased from 250 million yuan to 2.77 billion yuan, with a compound growth rate of 123%; Net profit attributable to owners increased from -$10 million to $370 million.
4.3 Aerospace electronics: unmanned system equipment fills the gap in the field of high-speed unmanned systems
Aerospace electronics is a high-tech listed company engaged in aerospace electronic measurement and control, aerospace guidance, aerospace electronic components and other specialties, is a modern industrial chain length unit built by China Aerospace Science and Technology Corporation on the key areas of aerospace technology application industry, and is the overall unit of the development of UAV type spectrum project of the whole army and the qualified supplier directory unit of centralized procurement of UAV system; The "Feiteng" series of precision guidance products is the only overall unit of the Aerospace Science and Technology Group. A number of models of unmanned system equipment of the subsidiary Aerospace Feihong Company successfully won the bid and filled the gap in the field of high-speed unmanned systems; As the overall unit of the unmanned equipment system, Aerospace Feihong Company has signed strategic cooperation agreements with military enterprises such as Dongfeng Off-road, Chongqing 308 Factory, Ordnance 202, and Ordnance 207, and led a number of industrial chain enterprises to solidly promote the special construction task of improving the capability of equipment in active service to meet the needs of complex battlefields.
4.4 Zongshen Power: The self-developed aeropiston engine has been used in multi-type UAVs
Zongshen Power is one of the domestic specialized small thermodynamic machinery manufacturing bases. The company adheres to the development strategy of extension, and has basically formed an industrial layout with "motorcycle engine and general machinery" as the core and covering emerging business fields such as "aviation power, new energy, high-end components". Zongshen Hangfa, a holding subsidiary of the company, is one of the first batch of innovative enterprises in China that have successfully independently developed aircraft engines with private enterprises as the main body. At present, C115 engines, C145 engines, aviation variable-pitch propellers and other products have been used on many types of UAVs and a variety of autorotary manned aircraft, filling the gap of domestic aviation piston engines. Zongshen Hangfa has broken through the core technologies such as "paddle-fly-hair matching", "electronic control technology of aviation piston engine" and "aviation electric variable pitch propeller", and further consolidated its core competitiveness in the field of "aviation piston power and power integration system".
(This article is for informational purposes only and does not represent any investment advice from us.) For information, please refer to the original report. ）
Selected report source: [Future Think Tank]. 「Link」