The Zhitong Finance App learned that Ping An Securities released a research report stating that the low-altitude economy is a comprehensive economic form with eVTOL aircraft as an important driving force, and that the drone and general aviation industries are the core industries for the development of the low-altitude economy. Currently, policies are driving the low-altitude economy into a period of rapid development. Against the backdrop of national attention and active local layout, the bank believes that industry segments such as low-altitude aircraft R&D and manufacturing, low-altitude infrastructure, and low-altitude flight support services will all benefit from the development of the low-altitude economy.

It is recommended to focus on the following targets related to the low-altitude economy industry chain: 1) eVTOL machine manufacturers: EHL Intelligence (EH.US), Wanfeng Aowei (002085.SZ); 2) Infrastructure service providers: Zhongke Star Map (688568.SH), Rice Information (688631.SH), Guorui Technology (600562.SH), Sichuan Jiuzhou (000801.SZ); 3) Drone manufacturers: Zongheng Co., Ltd. (); 4) General aviation operation: CITIC Haizhi (000099.SZ); 5) Transportation planning: Shenzhen Transit (688070.SH 301091.SZ)

Ping An Securities's views are as follows:

Low-altitude economic development has broad prospects, and eVTOL electric vertical take-off and landing aircraft have become an important traction engine.

In March 2024, the low-altitude economy was first included in the 2024 State Council Government Work Report. The low-altitude economy refers to a series of economic activities driven by low-altitude flight activities, including a series of economic activities generated in airspace within 1,000 meters (which can be extended to less than 3,000 meters in a broad sense). Since low-altitude traffic can be reached point-to-point, it can solve the problem of traditional ground traffic congestion. The development prospects are very broad. According to CCID consultant statistics, in 2023, China's low-altitude economy will reach 505.95 billion yuan, an increase of 33.8% over the previous year. It is predicted that by 2026, China's low-altitude economy will exceed 1 trillion yuan. Low-altitude aircraft are the main carriers of the low-altitude economy. Compared with helicopters, drones, and fixed-wing aircraft, the eVTOL core is electric+vertical take-off. It has the advantages of low operating cost, low noise, and high safety, and can meet the needs of urban air traffic with a high cost performance ratio. The bank believes it will become an important driver for low-altitude economic development. Potential eVTOL application scenarios can be roughly divided into six categories: manned passenger transportation, cargo transportation, public services, police security, national defense, military, and private flight. According to Morgan Stanley's forecast, the two major scenarios of cargo logistics and urban manned flight will account for roughly 52% and 46% respectively by 2040.

Policies and systems are being promoted at an accelerated pace, and the low-altitude economy has entered a period of rapid development.

Currently, the development of a low-altitude economy is devolved from national agencies to the local government at the level of unified planning, policy formulation, and specific management and implementation. It was vigorously promoted at the national and local policy level. The introduction of national policies related to the low-altitude economy accelerated during the “14th Five-Year Plan” period, unmanned aerial vehicle legislation was introduced in 2023, and airspace management regulations were continuously refined. In 2024, many places included the “low altitude economy” in local government work reports, and regions represented by Shenzhen, Hefei, and Wuxi were actively laid out. Protected at the institutional level, China's airspace management system reform provides conditions for low-altitude economic development. According to the latest “National Airspace Basic Classification Method”, G and W airspace (roughly corresponding to non-A-E low-altitude airspace below 300m) are unregulated airspace, and can only be reported before entering. In addition, for the design, manufacture, and use of civil aircraft, it is necessary to separately apply to the Civil Aviation Administration and obtain a model certification (TC), production license (PC), and airworthiness certificate (AC). The pace of domestic eVTOL airworthiness certification accelerated markedly in the second half of 2023. Up to now, the domestic Ehang EH216-S (unmanned manned eVTOL) and Fengfei V2000CG (unmanned vehicle eVTOL) are leading the way in obtaining airworthiness certification.

Drones and general aviation protect core industries, infrastructure and professional services.

The low-altitude economy industry chain covers various types of industries such as aircraft R&D and manufacturing, infrastructure construction and operation, and flight support services, and is rich in racetracks. Behind this, the low-altitude flight industry is the core industry of the low-altitude economy, based on the drone and general aviation industry. According to the latest data from the Civil Aviation Administration, by the end of 2023, there were 1.267 million registered drones, an increase of 32.2% over the previous year, and 23.11 million flight hours a year, an increase of 11.8%; China has 3,173 registered general aviation aircraft, operating 1.357 million hours throughout the year, with an average annual growth rate of more than 12% over the past three years. At the same time, the low-altitude security industry provides support services for low-altitude flight and airspace safety, including: 1) In terms of infrastructure support, airports are the most important part of the physical facility network. As of 2023, there are 451 general airports nationwide, with a 4-year CAGR of 16% (vs the number of domestic civil aviation transport airports with 4-year CAGR +2%), and the development of the low-altitude economy also requires solving problems such as air traffic management, communication, navigation, and surveillance, involving a range of software and hardware infrastructure. 2) In terms of professional support services, including various service industries such as flight training, testing and inspection, charging, and maintenance, it will also support and assist the development of the low-altitude economy. Take flight training as an example. According to data from the Civil Aviation Administration, the number of pilots in China has maintained a high level of growth. By the end of 2023, the total number of valid civil aircraft pilot licenses issued by the Civil Aviation Administration was 8,6091, or 9% for 10 years.

Risk warning: 1) Airspace liberalization falls short of expectations. 2) Technology iterations fall short of expectations. 3) Social acceptance falls short of expectations.