Guotai Haitong: Demand for rocket engines continues to grow; recommend focusing on leading upstream companies.

Guotai Haitong released a research report stating that during the "15th Five-Year Plan" period, the accelerated networking of satellite internet constellations will drive continued growth in demand for rocket engines. The high technical barriers of engines promote value enhancement in upstream materials and precision manufacturing segments. Considering that current complete vehicle enterprises are not yet listed, it is recommended to focus on upstream leading enterprises with core technologies and mass production delivery capabilities. Guotai Haitong's main views are as follows: Demand for satellite internet constellation networking is accelerating, and the market space for rocket engines is expected to continue expanding Commercial aerospace is driving the aerospace industry's transformation from customized, small-batch, high-cost operations to standardized, large-scale, low-cost operations, with the industry accelerating toward large-scale application. Low-orbit satellite frequency and orbit resources are scarce, and under the ITU constellation deployment deadline requirements, rocket launch demand is urgent. In 2026, China's rocket recovery technology achieved important breakthroughs, but large-scale reuse still requires continuous verification, and the impact on new engine demand is expected to be limited in the short term. Assuming at least 10 types of liquid rockets have satellite internet constellation networking launch capabilities, with single-model annual launch frequencies of 5/10/20 times for 2027-2029 respectively, calculated at 10 engines per rocket and RMB5 million per engine, the corresponding annual theoretical market space is approximately RMB2.5 billion/5 billion/10 billion respectively. Liquid oxygen-kerosene and liquid oxygen-methane technologies are developing in parallel, and the supply system is evolving from central state-owned enterprise dominance to diversified development Liquid engines are mainly composed of thrust chambers, turbopumps, gas generators/pre-combustion chambers, pipelines and valves, etc. They generate thrust by controlling the continuous and stable combustion of propellants to produce high-temperature and high-pressure gas, which is accelerated and expelled through nozzles. Liquid oxygen-kerosene technology is mature and has become the mainstream choice for most rockets, while liquid oxygen-methane has become an important development direction due to its reusability potential. China's liquid engine complete vehicle supply system is evolving from central state-owned enterprise dominance to joint development by multiple entities: Aerospace Hi-Tech Holding Group has deep technical accumulation in liquid rocket engines; private enterprises such as LandSpace, Space Pioneer, Galactic Energy, CAS Space, iSpace, and Orienspace continue to advance independent research and development, building vertical integration capabilities for engine development and complete rocket integration; independent power suppliers such as JiuZhou YunJian are exploring specialized supporting models. Extreme operating conditions and complex structures create high technical barriers, and advanced materials and high-end manufacturing segments have high added value Liquid rocket engines need to achieve high-temperature and high-pressure combustion and precise thermal management within limited space and weight constraints, with technical barriers mainly concentrated in two major segments: materials and materials processing. On the materials side, high-performance copper alloys, superalloys, titanium alloys, and refractory metals form the core material system of engines; on the processing side, complex cooling channels and precision structures impose stringent requirements on forming processes and machining accuracy. Traditional manufacturing processes are technically mature with fully validated reliability, while metal additive manufacturing has significant advantages in forming complex structures, reducing part counts, and shortening manufacturing cycles. Risk warnings: Constellation networking progress falling short of expectations; engine R&D progress falling short of expectations; launch cost reduction progress falling short of expectations; intensifying industry competition; performance delivery falling short of expectations.