Jiangxi civilian explosion leader, 18 years is expected to usher in a performance explosion: Jiangxi Guotai Minexplosive Group Co., Ltd. is the largest civil explosive equipment manufacturer in Jiangxi Province. at present, the company has a total industrial explosive production capacity of 72000 tons, industrial detonator production capacity of 91 million sets, plastic detonator production capacity of 300 million meters, industrial detonator production capacity of 6 million meters, potassium perchlorate production capacity of 10,000 tons. At present, the company's asset acquisition of Jiang Copper Minbao and Weiyuan Minbao is making steady progress. The annual income of the two companies in 2017 is 2.10 yuan and 283 million yuan respectively, and the net profit of returning to their mother is 5667 yuan and 12.14 million yuan respectively. After the completion of the reorganization, the company's revenue and profits will increase significantly.

With the improvement of the supply and demand pattern, the civil explosion industry is expected to recover, and the company's location advantage is obvious: since 2017, the growth rate of GDP has stabilized and rebounded, and the demand of the civil explosion industry has picked up somewhat; the CR20 of the civil explosion industry has increased from 25% in 2006 to 61% in 2016, and the industry concentration has increased steadily.

The industry is expected to usher in a recovery, with the gross domestic product (GDP) of the civilian explosion industry rising 11.8% year on year to 28.163 billion yuan in 2017. The company has obvious geographical advantages, and Jiangxi Province is rich in mineral resources; the average growth rate of GDP, transportation, warehousing and postal fixed assets investment is higher than that of the whole country, and the demand space is broad; after the completion of the reorganization of the company, Jiangxi Province will form a unified industry pattern with only one private explosive enterprise. The production site of the company covers the whole province, and the market share in the province is more than 90% after the reorganization, which is also convenient for the company's products to radiate to the periphery. In addition, Jiangxi has obvious regional barriers, and explosives from other provinces only account for 5% of the market. Through holding, the company participates in the project of building a new 12000-ton emulsion explosive production line in Nigeria to seek overseas development.

The breadth of the civil explosion industry continues to extend, and the diversified industry develops steadily: the Changfeng Corridor project serves the Changfeng Limestone Mine and several surrounding mines. The construction period of the project is 2 years, the internal requirements are completed in one year, and the company holds 45% of the shares. After putting into production, it can achieve an income of 384 million yuan and a profit of 159 million yuan, significantly thickening the company's performance. In recent years, the company has explored transformation and upgrading, cut into the fine chemical, information and intelligent manufacturing industries, and achieved rapid growth of diversified business through mergers and acquisitions.

Optimistic about the future development prospects of the company, recent major shareholders continue to increase their holdings: the controlling shareholder, military Industry Holdings, recognizes the company's investment value and its ability of sustained and stable development in the future, and plans to increase its holdings by 1% of the company's shares. At present, it has completed an increase of 1.1% of the total share capital. It is expected to continue to choose an opportunity to increase its holdings of the company's shares in the future (the price of the increase will not exceed 16 yuan per share).

Profit forecast: the net profit in 2018 and 2019 is estimated to be 2.08 and 233 million yuan respectively, and the EPS in 2018 and 2019 is 0.71 yuan and 0.80 yuan respectively, and the corresponding PE is 22 and 19 times respectively. Give a rating of "overweight".

Risk factors: the upward trend of the civil explosion industry is not as expected; the process of corporate restructuring and diversified industrial development is not as expected.