Incident (1) Company announcement: It is intended to issue a total of RMB 53.205,500 common shares to the 10 shareholders of Shenaxe Minbang (after implementing the 2011 profit distribution, the number of shares issued by the company was adjusted to 106.886 million shares) to purchase 95.10% of the shares of Shenaxe Minbang's 10 shareholders in total. (2) On the morning of May 19, a vehicle carrying explosives entered the Yanru Expressway Tunnel under construction in Hunan Province and exploded while unloading goods; according to media reports, 20 people died in the accident. The review plan was settled: the additional issue price remained unchanged, and the asset assessment price was fine-tuned; the additional issue price remained at 31.46 yuan/share (after 10 transfers of 1.50 yuan in the 2011 annual report, the issue price was adjusted to 15.66 yuan/share), and the share value assessment of Shaneaxe Minbang was 176.884 million yuan (slightly higher than the previous Shinaxe Minbang asset assessment of 1650,353,600 yuan). Since Nanling had previously acquired 4.9% of Shenaxe shares in cash, it was adjusted to 10.688.66 million shares. ) There is not much difference from the previous plan (52.4588 million shares). The performance forecast is conservative, and the probability of exceeding expectations is high: we can see from three aspects that the performance forecast in the announcement is conservative; (1) the company did not consider the decline in ammonium nitrate costs; (2) the company's current performance forecast did not take into account the company's future expansion by 32%. There is a high probability that the future prosperity of the civilian explosion industry will rise by only 4.6%; (3) the output value of the first quarter of the year accounts for 18% of the year; in addition, the company's current performance forecast does not take into account the company's future expansion of 25% of the year. Zhang and blasting services It developed rapidly after getting more partners, so there is a high probability that the company's future performance will exceed expectations. Expansion of the industrial chain has begun: According to the contracts the company has reached and the projects currently being negotiated, it is estimated that the combined company's blasting engineering service revenue will increase nearly 15 times in 2012, reaching 80 million, reaching nearly 120 million in 2013, and the company's blasting engineering services will enter a leapfrog development period. At the same time, after the integration of the company is completed, it is possible to control upstream supply and integrate distribution links downstream, and it is estimated that the total annual sales revenue of mergers and acquisitions sales companies will reach about 500 million yuan. The accident highlights the shortcomings of the separation of upstream and downstream industries, and will further draw the government's attention to the safety of the civilian explosion industry, which is conducive to the advancement of industrial chain integration; we judge that in order to further regulate the production, sale, transportation and use of explosion products, the government will inevitably accelerate the integration of the industrial chain of the civilian explosion industry, because only industrial chain integration can reduce the difficulty of supervision; therefore, relevant departments will inevitably support large-scale mergers and acquisitions to expand downstream distribution and blasting services. Investment recommendations We forecast the company's EPS for 2012-2014:1.27 yuan, 1.42 yuan, and 1.53 yuan. Considering that the company's absorption and merger will expand downstream (integration of sales channels within the province, cooperation in blasting services within and outside the province) after the completion of the merger, we gave the company 27x12PE with a target price of 34.25 yuan. We recommend purchasing.