CITIC Securities: The satellite Internet industry chain ushers in a pivotal moment of transformation

Yongxing Securities released a research report stating that satellite internet has a wide range of applications, and is of great significance in military and civil applications, making it the focus of international technological competition. According to data from the SIA quoted by China Commercial Information Network, the market size of the China Spacesat internet industry reached 29.248 billion yuan in 2021, and is expected to reach 44.692 billion yuan by 2025, with a compound annual growth rate of 11% from 2021 to 2025. The team believes that in the future, with the gradual implementation of satellite internet applications, the industry is expected to experience rapid growth, and companies that position themselves early and occupy important links in the industry will benefit from the development of the satellite internet industry. Satellite internet solves the pain points of communication network coverage, with a wide market space and is in a period of rapid growth. In a narrow sense, satellite internet refers to high-speed communication in space, using multiple satellites to form a broadband communication network coverage. It is suitable for sparsely populated areas and regions, addressing the communication needs in areas without base stations. In a broader sense, satellite internet is a satellite network solution based on communication, navigation, and remote sensing technologies, empowering various industries. According to the China Commercial Information Network quoted by SIA, the market size of the China Spacesat internet industry reached 29.248 billion yuan in 2021, and is expected to reach 44.692 billion yuan by 2025, with a compound annual growth rate of 11% from 2021 to 2025. Multiple factors together are driving the continuous development of satellite internet. 1) Supported by policies: In recent years, the Chinese government has attached great importance to and supported the development of the satellite internet industry, introducing a series of policies to support the construction of satellite internet. China regards the construction of satellite internet as an important part of the "New Infrastructure". 2) Wide range of applications: The integration of space-ground fusion network technology for 6G can provide differentiated network services, empowering industries such as mobile phones, maritime, and automotive. 3) Facilitating the development of 6G networks: According to the latest data from the International Telecommunication Union of the United Nations, by 2023, the number of people globally without internet access is estimated to decrease to 2.6 billion. In 2021, the IMT-2030 (6G) Promotion Group of China released the "Overall Vision and Potential Key Technologies White Paper of 6G", proposing the construction of a globally wide-area coverage satellite internet to achieve global communication network full-area coverage and seamless connection. Through internet technology, achieve interconnection among the internet, mobile communication networks, and space networks, build a converged network, achieve full coverage of natural space, and global omnipresent connection. The integration of satellite-ground communication has become an important development direction in current communication technology. 4) Technological progress promotes cost reduction and efficiency improvement in the industry: Various major aerospace countries are accelerating the replacement of main models of carrier rockets, the development of reusable rocket technology continues to advance, which is expected to further reduce the launch cost of carrier rockets. In addition, the use of multiple-star technology can fully utilize the carrying capacity of rockets, improve launch efficiency, and reduce launch costs. Satellite internet is a key aspect of great power competition, with intense competition for low-orbit space resources. According to the Ministry of Industry and Information Technology, satellite frequencies and orbit resources are strategic resources shared by all mankind and are scarce. All countries in the world must adhere to the principles of the International Telecommunication Union's "Constitution" and "Radio Regulations", follow the principle of "first come, first served", and carry out the declaration, coordination, registration, and maintenance of satellite network materials, and no country can unilaterally dominate access to and use of satellite frequency and orbit resources. As various satellite application areas continue to expand, the competition among countries for satellite radio frequency resources is becoming increasingly fierce. Investment advice Satellite internet has a wide range of applications, with important significance in military and civil applications, and is the focus of international technological competition. Yongxing Securities believes that in the future, as satellite internet applications gradually come to fruition, the industry is expected to experience rapid growth. Companies that position themselves early and occupy important links in the industry are expected to benefit from the development of the satellite internet industry. Suggestions for investment focus on: 1) Satellite platforms and manufacturing: China Spacesat, Shanghai Hugong Electric Group; 2) Satellite payload and components: China Aerospace Times Electronics, Jushri Technologies, Inc., Changshu Tianyin Electromechanical, Hunan Aerospace Huanyu Communication Technology, Great Microwave Technology, Chengdu Spaceon Electronics, Zhejiang Chengchang Technology, Chengdu M&S Electronics Technology; 3) Networking: Genew Technologies; 4) Rocket materials and components: Shaanxi Sirui Advanced Materials, Essence Fastening Systems, NanJing GOVA Technology; 5) Satellite operation and services: China Satellite Communications, Geovis Technology Co., Ltd., Piesat Information Technology, Shanghai Huace Navigation Technology; 6) Terminal applications: Guangzhou Haige Communications Group Incorporated, Hwa Create Co., Ltd. Risk warning The progress of satellite constellation construction is slower than expected; shortages in supply of carrier rockets; risks of rapid technological iteration; geopolitical risks.