The company is mainly engaged in civil explosion business and rail transit electrification and information engineering services. The company's main business is the integration of research and development, production, sales and blasting services of civil blasting equipment, the main products are industrial explosives, industrial detonators and industrial cables and other civil blasting equipment, while providing blasting services for mines, infrastructure projects and so on. The company expands to the field of non-civil explosion, building a new business map of civil explosion integration + rail automation and information + the coordinated development of new military materials industry. The main products and services of rail automation include railway power supply integrated SCADA system, railway power supply production dispatching command system and so on. Military main products military tungsten-based new damage materials, new non-metallic fiber materials and tantalum niobium oxide.

The non-net profit deducted in the first quarter of 2022 was 31 million yuan, an increase of 13.08 percent over the same period last year. According to the company's announcement, revenue is expected to reach 405 million yuan in the first quarter of 2022, up 17.60 percent from the same period last year; net profit from home is 34 million yuan, up 5.46 percent from the same period last year; and net profit after deducting 31 million yuan, up 13.08 percent from the same period last year. In 2021, the company achieved operating income of 1.988 billion yuan, an increase of 13.29% over the same period last year, a net profit of 240 million yuan, an increase of 25.01% over the same period last year, and a net profit of 223 million yuan, up 30.03% over the same period last year. Among them, the sales revenue of civil explosive products, rail transit protection, electrical automation and military materials were 13.20,3.19 and 141 million yuan respectively, up 8.76%, 13.57% and 3.94% over the same period last year. The company's net sales interest rate in 2021 rose 1.09 percentage points to 14.06% compared with the same period last year. Due to the sharp rise in raw materials for industrial explosives, the company adjusted the prices of industrial explosives, detonators and industrial detonating cords twice in August and November 2021, of which industrial explosives increased by 2000 yuan / ton (including tax). The profitability of industrial explosives business has been enhanced, while the company has actively expanded other areas, and the income and profits of non-civil explosive industry have increased significantly.

We will vigorously develop the business of electronic detonators and realize capacity expansion and structural adjustment in policy opportunities. At present, there are 118 production licenses and 71 enterprise groups in civil explosive production enterprises. It is proposed in the 14th five-year Plan for the Safety Development of Civil explosive Industry that the number of production enterprises is reduced to less than 50. Cathay Pacific Group sold 159600 tons of industrial explosives in 2021, including 119000 tons of packaged explosives, and mixed explosives exceeded 40, 000 tons for the first time, ranking eighth among more than 70 civil explosive production enterprises in the country. Under the promotion of the policy of comprehensively promoting digital electronic detonators, the company plans the planning, construction and production capacity replacement of digital electronic detonators.

In 2021, the company sold 3844 million industrial detonators, of which 8.24 million electronic detonators were sold, an increase of 69 percent over the same period last year. At present, the company has a production capacity of 1630 million electronic detonators. Xinyu Guotai, a wholly-owned subsidiary, has completed the second phase of digital electronic detonators, and the third phase of the project has entered the stage of equipment installation and commissioning. In July 2021, the company established a joint venture with Shanghai Kuncheng to set up Guoguan Microelectronics with an annual output of 5000 million chip modules to expand the digital electronic detonator industry chain.

China's weapons and equipment has entered a period of inter-generational construction, the demand for military products is growing, and the future prospect of the company's military business is promising. In April 2021, the company acquired a 36.86% stake in Beijing Shenzhou Zhihui, which is mainly engaged in military simulation business, and officially entered the field of military industry through equity transfer and capital increase. In September 2021, the company acquired 51% of Jiangxi Aoke New Materials. Taking the business field of near bulletproof warheads as an opportunity, the company continues to expand the scope of the company's military-civilian integration industry from the direction of defense equipment, and further expand the field of new military materials. As China's weapons and equipment enter the iterative period, the demand for special alloys, composite materials and electronic components increases greatly, and a large number of rare metals such as tantalum and niobium need to be used as raw materials. Tuohong Xincai, a subsidiary of the company, seized the opportunity of the substantial increase in demand for tantalum and niobium products in the military industry, continued to develop new customers and unleashed production capacity. In 2021, the production and sales of tantalum and niobium oxides increased by 49% and 73% respectively compared with the same period last year. At the same time, the holding subsidiary Sanshi Nonferrous has an annual output of 700 tons of tantalum and niobium rare metals project in an orderly manner.

Profit forecast. We estimate that the net profit of the company from 2022 to 2024 is 3.73,4.86 and 579 million yuan respectively, and the corresponding EPS is 0.64,0.83,0.99 yuan respectively.

With reference to the valuation of comparable companies, it is given 15-18 times PE in 2022, corresponding to a reasonable value range of 9.6-11.52 yuan, which is better than that of the big city for the first time.

Risk hint. Capacity expansion was less than expected and raw material prices fluctuated sharply.