Event: on August 18, the company released its semi-annual report of 2021, with an operating income of 814 million yuan, an increase of 18.50% over the same period last year, and a net profit of 88 million yuan, an increase of 5.1% over the same period last year, slightly exceeding market expectations.

Comments: "civil explosion integration + rail transportation informatization" dual-core-driven development, effectively promote both income and profit growth. The company's 21H1 realized operating income of 814 million yuan, an increase of 18.50% over the same period last year, and a net profit of 88 million yuan, an increase of 5.1% over the same period last year. From the perspective of business: (1) the business income of civil explosion business reached 541 million yuan, an increase of 11.15% over the same period last year, of which 73000 tons of industrial explosives were sold, and the business of industrial detonators grew rapidly. A total of 1748 million hair were sold during the reporting period, an increase of 187.42% over the same period last year, a record high. (2) with the key products of Taige era, such as catenary switch monitoring system, power telecontrol measurement and control terminal, mechanical and electrical equipment and tunnel lighting monitoring system, power supply environment security monitoring system, etc., 21H1 realized revenue of 93.31 million yuan, an increase of 9.71% over the same period last year, and a net profit of 29.13 million yuan, an increase of 18.73% over the same period last year. (3) with the rapid development of other diversified industries, 21H1 achieved a business income of 179 million yuan, an increase of 56.22% over the same period last year, and a net profit of 7.8692 million yuan, an increase of 235.51% over the same period last year.

Profitability remained stable, and the expense rate decreased significantly during the period. 21H1's gross profit margin decreased 4.02pct compared with the same period last year, mainly due to tight supply of ammonium nitrate, the main raw material for civil explosion business, and a sharp rise in prices, while the company actively improved governance. During this period, the expense rate improved 3.83pct compared with the same period last year, so that the company's net profit rate during the reporting period remained 12.61%, which was basically stable compared with 13.49% in the same period last year. As the price of raw materials tends to stabilize and the company's other businesses are further expanded, the company's profitability is expected to be further improved.

Civil explosion has entered the "electronic detonator" era, rail transportation information orders are full: the company's civil explosion industry chain runs through the whole process of research and development, production, sales, distribution, blasting, etc., and can provide customers with a full range of services. it is one of the enterprises with the most complete range of products in China's civil explosion industry. Among them, digital electronic detonators as the company's key development direction, 21H1 sales of 378.645 million hair, an increase of 187.42% over the same period last year, a record high. In July this year, the company set up a joint venture with Shanghai Kuncheng to set up a digital electronic detonator delay control module manufacturer Guomi Microelectronics, which laid a solid foundation for the company's subsequent capacity expansion of digital electronic detonators. In the field of rail transit, Taige Times, a subsidiary, is one of the earliest pioneers in the field of power supply automation of rail transit in China, and has built an integrated product system covering the three stages of rail transit construction, operation and maintenance. key products catenary switch monitoring system, power telecontrol measurement and control terminals, mechanical and electrical equipment and tunnel lighting monitoring system, power supply environment safety monitoring system, etc., have a strong competitive advantage in market segments. So far, its products have covered the rail transit of 18 railway bureaus and nearly 30 cities across the country, and it is one of the few suppliers in the industry that can provide 300-350km/h high-speed rail products. According to the company's semi-annual report, the first half of the Tiger era in-hand orders broke through an all-time high, showing good potential.

Holding Shenzhou Zhihui, sending force military simulation. In April 2021, the company announced that it had acquired a total of 36.86% of the shares in Beijing Shenzhou Zhihui Technology Co., Ltd. at a total transaction price of RMB 76549442 by way of equity transfer and capital increase, becoming the single largest shareholder of Shenzhou Zhihui. Shenzhou Zhihui is an enterprise specializing in military simulation and weapon equipment supporting product technology research and development, service and product sales. He has been deeply cultivated in the field of military simulation for many years and has a good reputation in the market. with weapons and equipment scientific research and production unit second-class confidentiality qualification certificate, equipment contractor qualification certificate, weapons and equipment quality management system certification certificate and other military research and production qualifications. Shenzhou Zhihui's main products can provide simulation services for military command operations, simulation training and equipment training, as well as various services for the whole process of military equipment demonstration, design, operation training and maintenance support. Under the background of military training and preparation for the 14th five-year Plan, military simulation, as an important part of the comprehensive exercise, may continue to be released and has broad prospects for development. relying on the accumulation of information industry technology, the company will timely cut into the field of military simulation and simulation. it may become an important business development direction in the future.

Investment suggestion: as a listed company controlled by Jiangxi military Industry Group, the company has rich technology accumulation in the business field of civil explosion and rail transit system, timely cut into the field of military simulation, will benefit the development of related industries during the 14th five-year Plan. We estimate that the company's net profit from 2021 to 2023 will be 2.5,3.5 and 410 million yuan respectively, and the corresponding valuation will be 23,16 and 14 times respectively. For the first time, the company will be given a Buy-An investment rating.

Risk hint: the price of civil explosive raw materials is rising, the delivery of rail orders is not as expected, and the development of military simulation business is not as expected.