Key points of investment:
Covered for the first time, a “gain” rating was given. The company is a leading enterprise in the explosion industry. It has sufficient orders for blasting services, and its strong shareholder background gives room for high future growth. For the first time covered, the company's revenue for 2024-2026 is estimated to be 92.01, 10.734, and 12.391 billion yuan, respectively, and net profit to mother of 745, 8.71, and 975 million yuan, respectively, and corresponding EPS of 0.60, 0.70, and 0.79 yuan respectively. Referring to comparable companies, combined with PE and PB valuation methods, a target price of 15.35 yuan for 2024 was given, corresponding to 25.6 times PE, and a “gain” rating was given.
The restructuring has created a leader in the popular industry, and shareholders of central enterprises have empowered room for growth. In 2023, the company completed the restructuring with Nanling Minbang to strengthen the integrated layout of the Minbang industry chain, while further increasing the market share of the industry to a leading position. China Energy Construction's central enterprise shareholder background not only provides reliable support for the company's brand influence at home and abroad, but also provides strong support for the company to grow bigger and stronger in the context of continuous industry integration and concentration. Currently, the company has sufficient explosives and detonator production capacity, and there is still room for expansion, and there are sufficient orders in hand for blasting services.
The industry pattern continues to be optimized, and going overseas opens up new growth space for the company. The high risk nature of the explosion industry itself has driven supply-side mergers and integration, and industry concentration continues to rise. Meanwhile, on the demand side, as a new expansion cycle of downstream capital expenditure such as mining and infrastructure gradually begins, the civilian explosion industry pattern is expected to be further optimized, and leading domestic enterprises will benefit first. Meanwhile, the strategic significance of addressing the import dependency of important resources has also encouraged Chinese mining companies to expand overseas. As a pioneer in the industry, Yipuli is expected to open up new opportunities for profit growth, from borrowing a ship to going overseas.
Catalysts: The growth rate of fixed asset investment in the mining and infrastructure industry is increasing, and industry integration is accelerating.
Risk warning: macroeconomic cycle fluctuation risk, industrial policy adjustment risk, production safety risk, raw material price fluctuation risk.