Incidents:
According to the 2012 semi-annual report, the company achieved operating income of 270 million yuan, a year-on-year decrease of 12.29%; operating profit of 4,1033,500 yuan, a year-on-year decrease of 35.35%; net profit attributable to shareholders of listed companies was 415.637 million yuan, a year-on-year decrease of 9.73%; basic earnings per share of 0.16 yuan, a weighted average return on net assets of 7.33%, and net cash flow from operating activities per share was 0.14 yuan. Net profit attributable to shareholders of listed companies is expected to change by -30% to 0% from January to September 2012.
Reviews:
The company's main business revenue declined, and gross margin picked up
During the reporting period, the company achieved revenue of 270 million yuan, a year-on-year decrease of 12.29%. Among them, the three major businesses of industrial explosives, industrial detonators, and industrial detonators achieved year-on-year changes in operating income of -15.68%, 105.05%, and 3.95%, respectively. Although industrial explosives have increased a lot, their impact on the company's performance is limited due to their low share of operating income. Despite this, the company's gross sales margin reached 36.36% in the first half of the year, up 8.87 percentage points from the first quarter of this year.
The curtain of industry integration has begun
In May of this year, after the company purchased 4.9% of Hunan Shenxu Minbang Group's shares for 84.3565 million yuan, it later planned to adjust the original share exchange, absorption and merger plan to the company's non-public offering of shares to purchase assets. Currently, the Minxun Bomb has a production capacity of 68,000 tons of industrial explosives, 250,000 rounds of industrial detonators, and 250,000 meters of industrial detonators. After this merger and absorption, the company's explosives production capacity will reach 159,000 tons, almost monopolizing the entire Hunan market. At the same time, the company and Shenxu calculated that the output value exceeded 1.4 billion yuan in 2011, ranking second among the top 20 in China. The company has changed from a regional enterprise to a cross-regional national popular enterprise.
Strategic cooperation with Xinjiang Xuefeng Science and Technology to successfully lay out the western market
The company used 65 million yuan to increase the capital of Xuefeng Technology, the largest and most comprehensive civilian explosive equipment manufacturer in the Xinjiang Autonomous Region, by 10 million shares (4.094%). The company's industrial explosives sales accounted for more than 70% of the market share in Xinjiang, and industrial detonators and detonators accounted for more than 95% of the market share in Xinjiang. It has licensed production capacity: 76,000 tons/year of explosives, 52 million detonators per year, detonators 8 million m/year, plastic explosives guide tubes 50 million m/year. This strategic cooperation with Xuefeng Technology is the most direct and effective way for popular explosives in the Middle East to enter the West. In addition to obtaining a good return on investment, Xuefeng Technology itself is also conducting an IPO. If it can be successfully listed, the company will receive greater return on investment.
Profit Forecasts and Investment Ratings
Considering the current domestic macroeconomic situation and the impact of factors such as falling product demand caused by the industry downturn, we lowered the company's 2012-2014 EPS to 0.63 yuan, 0.67 yuan, and 0.74 yuan respectively. The P/E values corresponding to the current stock price were 18.65 times, 17.51 times, and 15.82 times, respectively, maintaining the “increase in holdings” investment rating, and gave a price-earnings ratio of 20 times, with a target price of 12.60 yuan.
