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== Sizing up the final frontier market == The overall “Space TAM” is generally agreed upon by industry participants and investors to be large and growing (i.e., $350-400bn now with potential to be over a trillion by the end of the decade). Deutsche Bank takes a more precise approach by focusing on the launch services portion, which is the most near-term and direct revenue stream for companies such as Rocket Lab. Space launch services involve the delivering of satellites and other equipment into orbit - all the design, manufacturing, and testing related to the rocket. To achieve a successful launch, a rocket must not only make it into space but also carry a payload to a certain destination and deploy a satellite into orbit. Other missions involve providing supplies to a space station or landing on the Moon (NASA Artemis Program). For 2021, Deutsche Bank estimates the global launch market will come in at around $8bn and this will likely grow to $38bn by 2030, representing a 20% CAGR. And importantly, Deutsche Bank expects this market to be supply constrained for the rest of the decade as demand from corporates and governments increases. '''Figure 3: Global launch TAM'''<ref>Source : Allied Research, Company reports, Deutsche Bank.</ref> [[File:Global launch TAM.png]] '''Figure 4: Global satellite deployments'''<ref>Source : BryceTech, Deutsche Bank, Euroconsult.</ref> [[File:Global satellite deployments.png]] Competitively, SpaceX dominates the market, capturing approximately half the value when excluding Chinese and Russian missions due to it having the lowest cost ($50-60m per launch vs. legacy $150-200m). SpaceX achieved this leadership position in several ways: * '''Commercial mindset with less bureaucracy''': Boeing and Lockheed combined their launch businesses to form the United Launch Alliance (ULA) monopoly in the US, which has been plagued by inefficiencies (Boeing's Starliner has also been delayed for several years now). * '''Modern clean sheet approach''': SpaceX leverages the latest computer-aided design and engineering whereas competitors often have been using decades-old rocket techniques, including being reliant on Russian-made engines for the past two decades (ULA used RD-180 engine for Atlas V). * '''Reusing rocket''': the first stage of rocket accounts for the lion’s share of cost and reusing it is difficult but critical to lowering costs (i.e., can price lower, factoring in future utilization of rocket vs. just one-off). * '''Captive demand''': SpaceX is carrying a lot of its own Starlink small satellites, which is essentially creating captive demand; Deutsche Bank estimates this could be worth $1-2bn annually. With SpaceX driving the cost of launch down, this has opened up space deployment to much wider set of business opportunities. In fact, 2021 saw record amounts of investment geared toward space sector start-ups. According to Seraphim Capital, 2Q21 saw $3.7bn of private investment, taking 1H21 to $6.4bn; this compares with 7.6bn in all of 2020, which was already a record in itself. In Deutsche Bank's view, this demonstrates an increasing desire to commercialize space, which should unlock many types of advancements in technology. Both companies and governmental organizations are deploying more and more satellites to enable the following: * Global broadband connectivity (alleviate coverage limitation of ground infrastructure). * Earth observation (environmental sustainability, urbanization). * IoT and M2M (monitoring billions of devices). * National security (early warning detection system). * Other services (weather, GPS, etc…). '''Figure 5: Quarterly private investment tracker'''<ref>Source : Seraphim Capital.</ref> [[File:20210924 Deutsche Bank RKLB Rocket Lab- The Gatekeepers of Space- Initiating with Bu Page 07 Image 0001.jpg|600px]] Collectively, Deutsche Bank believes these use cases involve developing a data platform in space that increasingly garners more commercial value with scale. According to Bryce Space & Technology, in 2010, only 70 satellites were launched globally whereas nearly 1,300 were launched in 2020. Similarly, based on estimates from Euroconsult, the cumulative number of satellites launched by 2030 will be >40k, compared with just 4-5k right now. Deutsche Bank believes demand for launch services will far outstrip supply through most of this decade as the industry tries to deliver reliable and frequent supply for customers. For example, SpaceX Starlink alone wants to send up 42k satellites into space to form a mega constellation (only ~1.7k deployed thus far). Amazon Kuiper has also announced plans to deploy over 3k satellites. === Small satellites driving growth === In conjunction with this growth, there has been a major shift occurring as the industry moves from having a small number of large satellites in geostationary orbit (GEO; 35,800km altitude) to a large number of small satellites in low-earth orbit (LEO, <1,000km altitude). For context, a large satellite typically weighs thousands of kilograms whereas a small satellite could weigh tens to hundreds of kilograms. Bryce Space pegs the average mass of a satellite at 109kg as result of nearly 80% of satellites launched now being small size, defined as being <600kg. Deutsche Bank expects this trend to continue and +90% of new satellites launched will be of the smaller form factor (note: the FCC has filings for >50k LEO small satellites). Why small satellites? The primary motives for using small satellites in LEO are speed, cost and efficiency. * Speed: by being so much lower in orbit, it is faster to transmit data back to Earth (20-30 millisecond latency vs. 600 milliseconds for GEO), and more generally, signals transfer faster through open space than cables, allowing LEO satellites to rival ground-based network speed. * Cost: smaller satellites are cheaper and easier to produce (<$500k vs. $100-200m); in relation, lower orbit environments are easier to accommodate. * Efficiency: it is quicker and more cost effective to launch satellites into LEO; it also easier to deorbit LEO satellites (atmospheric drag pulls a satellite into the atmosphere causing it to burn up). === Rocket launch market evolving === The shift to small satellites has implications for the rocket launch market. Historically, the frequency of launches has been exceedingly low and limited to large rockets made by quasi-governmental entities. Hence, customers had to plan very far ahead of time and were often subject to delays. In 2020, there were only 114 orbital space rocket launches globally, with a handful that either did not carry any meaningful payload or failed to reach their intended destination. More than 50% of small satellites launches in the past year were delayed, anywhere from 4 months to 2 years. To address this, the industry has been leveraging ridesharing, allowing multiple parties to spread out the cost of a large rocket launch (e.g., Falcon 9, Soyuz, Arianespace 5, Atlas V). While this may be most cost-effective way of getting rockets into orbit, a large rocket can only deliver the payload to a single position (referred to as orbit inclination). From there, small satellites need to be moved to their intended altitude and orbit, which requires either an onboard propulsion system or an in-space shuttle (i.e., space tug “tows” satellite to right location). There are drawbacks to doing this. Onboard propulsion adds cost and weight to a payload. In-space shuttling is expensive and slow, often requiring weeks or months (adds >$10k cost per kg to rideshare launch). There is also an issue when it comes to inclination as a satellite cannot always be delivered to its correct orbit even if the altitude is achieved. In this context, Deutsche Bank believes there will be growing demand for dedicated launches (i.e., 1 customer buys an entire launch to deliver to a specific position), tailored for small satellites and constellations (batch of small satellites) as costs come down and launch reliability and frequency increases. This will likely enable customers to have much higher degree of flexibility to deploy satellites and time-to-market (i.e., company or government does not need to wait on a heavy rocket launch schedule). Moreover, when satellites fail or break down, a dedicated launch vehicle can directly send up satellites to replace. === Breaking down the launch market === In its framework, Deutsche Bank segments the launch TAM into 4 sizes: * Small (<1,500kg): mostly dedicated satellite launches going forward. * Medium (1,500-8,500kg): high usage for dedicated constellation launches. * Heavy (8,500-30,000kg): large satellites, ride-share and some dedicated launches for large constellations. * Super heavy (>30,000kg): ride-share; Moon and Mars missions. {| class="wikitable" |+Figure 6: Launch TAM by rocket type<ref>*includes Starlink, China, Russia, etc… Source : Allied market research, Company reports, Deutsche Bank, Relativity.</ref> !($m) !2021E !2025E !2030E |- |Small (<1,500kg) |325 |2,019 |3,240 |- |Medium (1,500-8,500kg) |2,000 |4,000 |7,000 |- |Heavy (8,500-30,000kg) |5,175 |7,000 |14,000 |- |Super heavy (>30,000kg) |0 |1,981 |13,260 |- |Total |7,500 |15,000 |37,500 |} Deutsche Bank estimates the small rocket portion of the TAM is currently just $300-400m but this could grow rapidly to $2bn by mid-decade and to $3-4bn by 2030. This is predicated on small satellites making up +90% of deployments, average small sat payload weight increasing, and dedicated launches increasing as a % of the total. Deutsche Bank notes some government missions are not allowed to be part of ride-share, so they would have to fly dedicated even if price/kg is much higher. {| class="wikitable" |+Figure 7: Small satellite market forecast<ref>Source: BryceTech, Company reports, Deutsche Bank.</ref> ! !2020 !2025E !2030E |- |Satellites deployed |1,282 |5,000 |6,000 |- |x % small size |94% |95% |96% |- |x Avg payload mass (kg) |120 |170 |250 |- |= Total payload |144,720 |807,500 |1,440,000 |- |x % dedicated launch |5% |25% |30% |- |x Avg cost per kg ($) |25,000 |10,000 |7,500 |- |= Small launch TAM ($m) |181 |2,019 |3,240 |} Ultimately, Deutsche Bank still sees medium/heavy rockets capturing the bulk of payload mass and wallet share due to scale (SpaceX Falcon 9 already getting <$3k/kg cost or $5k for ride-share, vs. small rockets >$20k). Deutsche Bank thinks the distinction between medium and heavy may get somewhat blurred going forward because there will be overlap of payloads. Technically, heavy rockets can service ALL the payloads, so it becomes a timing vs. weight optimization exercise (and also volumetric capacity for certain satellites). For the majority of small satellites, these will be part of constellations where batches of satellites will be launched to different orbital planes; this means a medium-size rocket may be more ideal than heavy. For example, a Telestat Lightspeed broadband constellation has 220 satellites (700kg each) operating at 20 different orbital planes and 11 satellites per plane or 7.7 ton payload. For superheavy rockets such as SpaceX’s upcoming Starship, Deutsche Bank thinks these will be better utilized for Moon transportation and deeper space missions (Mars). To illustrate this, SpaceX recently won NASA’s Artemis Program award to return to the moon; this will involve using multiple Starships in LEO as fuel tankers and also a customized Starship for lunar landing. {| class="wikitable" |+'''Figure 8: Launch companies by rocket size<ref>Source: Company reports, Deutsche Bank. *some companies make multiple sizes of rockets **ULA is joint venture between Boeing and Lockheed Martin.</ref>''' !Size !Companies |- |Small (<1,500kg) |ABL, Astra, Relativity, Firefly, Rocket Lab, Virgin Orbit |- |Medium (1,500-8,500kg) |Energia, Firefly, Northrop Grumman, Rocket Lab |- |Heavy (8,500-30,000kg) |Arianespace, CASC, Relativity, ULA**, SpaceX |- |Super heavy (>30,000kg) |Blue Origin, SpaceX |} '''Figure 9: Launches with and without small satellites'''<ref>Source : BryceTech.</ref> [[File:20210924 Deutsche Bank RKLB Rocket Lab- The Gatekeepers of Space- Initiating with Bu Page 10 Image 0001.jpg|600px]] === Opportunities beyond launch services === Beyond launch services, Deutsche Bank thinks there is an opportunity in the '''space systems market'''. Space systems involve providing hardware infrastructure for satellite development so customers can focus on creating value-add software and features for the payload instead of manufacturing satellites. This includes satellite components and constellation management services such as enabling the satellite to move around in space with propulsion. This should eventually eliminate bespoke investment in satellite bus development, creating more standardization. Deutsche Bank estimates this could be a $20bn market and larger rocket companies will look to consolidate the supply chain. For example, Rocket Lab acquired Sinclair Interplanetary last year, gaining strong capabilities in reaction wheels and star trackers that support rapid-schedule small satellite programs. Another opportunity is the '''satellite data and analytics market'''. These companies design and operate satellites in space, leveraging software/analytics to sell subscription services to customers, often to provide insights about climate, weather, maritime, aviation and agriculture. These are customers for rocket launch companies. In theory, this market could be worth hundreds of billions, but Deutsche Bank does not think it is entirely serviceable, in part due to conflicts of interest. Deutsche Bank estimates the SAM for this market is at least around $10-15bn with potential to grow to $30-40bn by the end of the decade. Separately, Deutsche Bank sees a '''space tourism''' market being cultivated by Virgin Galactic and Blue Origin. This will cater to ultra-high net worth individuals for the foreseeable future where Deutsche Bank estimates the TAM to be around $5-10bn longer term (295k UHNW individuals globally x $250k ticket price x 10% willing to travel to space per year). Longer term, rocket technology could potentially enable intra-earth trips to be much faster and cheaper using supersonic/hypersonic point-to-point travel. For example, SpaceX envisions a trip from New York City to Shanghai occurring in 40 minutes. There will certainly be many regulatory and environmental hurdles to work through but Deutsche Bank believes aviation is ripe for disruption after decades of stagnation. '''Figure 10: Data and analytics potential TAM'''<ref>Source : Allied Market Research, Planet Labs.</ref> [[File:20210924 Deutsche Bank RKLB Rocket Lab- The Gatekeepers of Space- Initiating with Bu Page 11 Image 0001.jpg|600px]] {| class="wikitable" |+'''Figure 11: Space technology universe'''<ref>*SPAC transaction management forecasts **latest private market round valuation Source : Bloomberg Finance LP, Company reports, Deutsche Bank</ref> ! rowspan="2" |Rocket launch ! rowspan="2" |Ticker ! rowspan="2" |Stock price ! rowspan="2" |Market cap ($m) ! rowspan="2" |Enterprise value ! colspan="4" |EV/sales ! colspan="4" |EV/Ebitda |- !2022E !2022E !2022E !2022E !2022E !2022E !2022E !2022E |- |Astra |ASTR |9.37 |2,413 |2,027 |33.9x |11.0x |4.6x |2.3x |<nowiki>-15.9x</nowiki> |<nowiki>-40.1x</nowiki> |17.3x |5.8x |- |ABL** |Private | |1,300 | | | | | | | | | |- |Firefly** |Private | |1,000 | | | | | | | | | |- |Relativity** |Private | |4,200 | | | | | | | | | |- |Rocket Lab* |RKLB |15.89 |7,153 |6,530 |35.9x |23.1x |14.1x |8.4x |<nowiki>-382.4x </nowiki> |216.4x |58.6x |27.5x |- |SpaceX** |Private | |74,000 | | | | | | | | | |- |Virgin Orbit* |NGCA |9.90 |3,632 |3,186 |45.5x |9.6x |3.5x |2.1x |<nowiki>-21.1x </nowiki> |<nowiki>-187.4x </nowiki> |13.9x |6.3x |- | colspan="13" |Systems & infrastructure |- |Momentus* |MNTS |10.27 |892 |840 |5.5x |1.4x |0.7x |0.4x |<nowiki>-46.7x </nowiki> |7.9x |2.1x |.7x |- |Redwire* |RDW |11.07 |753 |693 |2.9x |1.6x |0.9x |0.5x |21.6x |10.8x |5.6x |2.8x |- | colspan="13" |Data & analytics |- |BlackSky* |BKSY |12.80 |1,891 |1,520 |13.3x |6.7x |3.9x |2.8x |1519.6x |21.1x |8.6x |6.2x |- |Planet Labs* |DMYQ |9.99 |2,757 |2,249 |11.8x |7.8x |5.0x |3.2x |<nowiki>-57.7x</nowiki> |<nowiki>-224.9x </nowiki> |33.6x |12.0x |- |Maxar |MAXR |29.82 |2,162 |4,473 |2.4x |2.2x |2.1x |2.x |9.3x |8.1x |7.0x |6.7x |- |Satellogic* |CFV |9.86 |1,190 |916 |19.5x |6.9x |2.5x |1.2x |<nowiki>-458.1x </nowiki> |18.7x |4.7x |1.9x |- |Spire* |SPIR |11.41 |1,868 |1,460 |12.8x |6.4x |3.1x |1.6x |243.3x |22.1x |7.4x |3.4x |- |Tourism | | | | | | | | | | | | |- |Virgin Galactic |SPCE |24.49 |6,300 |5,775 |501.x |102.3x |30.1x |14.5x |<nowiki>-26.2x</nowiki> | -39.4x |<nowiki>-177.7x</nowiki> |38.8x |}
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