Main points of investment:
Income growth slowed in the first half of the year, while net profit grew negatively. In the first half of 2015, Jiulian Development achieved operating income of 1.868 billion yuan, + 0.31% compared with the same period last year; realized net profit belonging to the parent company of 92 million yuan,-9.21% year-on-year; deducted non-net profit of 90 million yuan,-10.88% year-on-year; and weighted average return on net assets of 4.61%. In terms of the index per share, the company achieved EPS0.28 yuan in the first half of the year, the net cash flow generated by operating activities per share was-0.36 yuan, and the net assets per share belonging to the shareholders of the listed company was 6.10 yuan.
Performance forecast for the first three quarters. It is estimated that the company's net profit from January to September 2015 will change by-40% compared with the same period last year, and the net profit is expected to be 8614.15-129.2123 million yuan, EPS0.40~0.59 yuan in the first three quarters of 2015; 3Q2015 net profit in a single quarter is-546.99-37.6009 million yuan, a year-on-year decrease in net profit of-4,813.76 yuan-5.0668 million yuan, EPS-0.02~0.11 yuan.
The production capacity is expanded and the integrated service of blasting engineering is continuously strengthened. The company continues to strengthen its blasting engineering integration services, and the operating income of the company's engineering construction business in the first half of 2015 was + 26.86% compared with the same period last year, showing a growing trend compared with the first half of 2014 and the whole year. It is expected to become a national and even international civil explosion leading enterprise with strong competitiveness.
Straighten out the management policy of mixed explosives on site to achieve the expected benefits. The company applied for blasting qualification in 2014, which to a certain extent met the requirements of industry management. In the first half of the year, the company sold 6657 tons of mixed explosives, an increase of 58.73% over the same period last year, achieving a gross profit of 10.21 million yuan and a gross profit margin of 32.38%. The on-site mixed loading expansion project has achieved the expected benefits in the first half of the year.
Poly Group has joined the company for a long time and has become a platform for the integration of Minbao business. Poly Jiulian Group plans to integrate the company. after the completion of the integration, the explosive production capacity of the company will be increased to 442500 tons, and the company is expected to become a national and even international civil explosion leading enterprise.
The company will benefit from the western development and the "Belt and Road Initiative" strategy. Since the implementation of the western development strategy, fixed asset investment in the western region has increased significantly. At the same time, with the implementation of the "Belt and Road Initiative" strategy, the prosperity of the downstream industry is expected to improve, and the company's performance is also expected to pick up.
Profit forecast and investment rating. We estimate that the EPS of the company from 2015 to 2017 will be 0.41,0.77 and 1.11 yuan respectively (calculated according to the total share capital of 509 million shares after the completion of this additional offering). According to the 2016 EPS and 40 times PE, we give the company a target price of 30.80 yuan and an "overweight" investment rating.
Risk hint. The uncertainty of blasting engineering orders; the risk of a sharp rise in the price of ammonium nitrate; the progress of asset injection is not as expected; overseas business expansion is not as expected.
