Jiulian Development: excellent Service provider of domestic Civil explosive Industry

Jiulian Development is a leading civil explosion enterprise in Guizhou Province, which was listed in 2004. Its main business is the R & D, production and sales of explosives, pipe cables and other civil blasting products, and provides customers with specific blasting engineering solutions and technical services.

At present, the company is one of the enterprises with the most complete variety of civil blasting equipment products in China. in terms of blasting engineering construction and technical services, the company has the first-class qualification of blasting and demolition, municipal engineering and blasting operation unit license (business). Mine general contracting, highway general contracting, housing construction second-class qualification, directional blasting leading in China, annual blasting construction capacity of 3.5 billion yuan Blasting construction and technical services are in the leading level in China and enjoy a high reputation.

The civil explosion industry rebounded, and the performance returned to the growth channel.

From 2014 to 2016, the growth rate of operating income was 14.68%, 18.99% and 6.95% respectively, and the growth rate of net profit was 3.89%,-66.29% and-31.11%, respectively. The company's performance declined in 2015 and 2016, on the one hand, due to the slowdown in the growth rate of infrastructure investment across the country, resulting in shrinking demand; on the other hand, due to overcapacity in the civil explosion industry and the state's deregulation of prices in the civil explosion market, resulting in dumping in the civil explosion industry and intensified price competition.

The civil explosion market picked up slightly in 2017, while the company actively expanded its blasting business and promoted integrated services. on the basis of stabilizing the volume of municipal engineering business, it focused on contracting mine general contracting projects, and its performance returned to the growth channel. The company expects to achieve an annual operating income of 42-5.2 billion yuan, an increase of 18%-53% over the same period last year, of which the business income of blasting engineering is about 3 billion yuan, up 53.8% over the same period last year; and the annual net profit is 7000-90 million yuan, up 13% and 45% over the same period last year.

Profit forecast

Without considering the acquisition of assets, we expect the company's net profit for 17-19 years to be 77 million yuan, 106 million yuan and 130 million yuan respectively, and the corresponding EPS is 0.23,0.32 yuan and 0.40 yuan respectively. The company announced the acquisition plan (revised version) on March 10, and we expect to complete the consolidation by the end of 2018 at the earliest. If we take into account the acquisition of assets and additional equity issues, it is estimated that the EPS in 2019 will be 0.55 yuan (the total performance commitments of the three assets in 2019 will be 104.4449 million yuan, and the total equity after the additional issuance will be 430 million shares). Due to the fierce competition in the civil explosion industry, the sharp rise in raw material prices in 2017 led to a continuous decline in the overall profit margin of the industry, and the company's profitability needs to be repaired, so it will not be rated for the time being.

Profit forecast of the company's main products and services

(1) the sales revenue of H1 for engineering construction and blasting services in 2017 was 1.354 billion yuan, an increase of 92.88% over the same period in 2016, mainly because the company increased its efforts to expand the market of blasting business, on the basis of stabilizing the volume of integrated municipal engineering business. to expand new areas of business, we expect the sales revenue of engineering construction and blasting services to grow by 24.96% and 15.01% respectively in 18-19. Maintain rapid growth.

(2) We expect that the sales and prices of explosives and pipe cables will remain basically stable in the future, and the sales revenue of explosives and pipe cables will maintain a small increase in 17-19.

Risk hint

The progress of asset injection is not as expected; the cost of raw materials is further rising; and the demand for infrastructure construction is declining.