Unique opinion Poly Group currently positions the civilian explosion sector as the Group's “13th Five-Year Plan” core strategic sector, and changed the civilian explosion business to one of its main businesses at the end of last year. Jiulian Development is the only platform for its civilian explosion business. Taking advantage of Poly's advantages in various aspects such as platforms, resources, and channels, as well as the collaborative development of Poly's civilian explosion business and military and civilian products business, Jiulian is expected to lead the horizontal integration, vertical integration, and internationalization process of the civilian explosion industry and move towards the goal of becoming an international civil bomber giant. Investment Highlights 1. Profit side: Achieve rapid profit growth through efficient and rapid mergers and acquisitions. The characteristics of explosives products determine the long-term regional monopoly characteristics of the civilian explosion industry. Currently, this situation is being broken by two trends: (1) integration within the region into cross-regional mergers and acquisitions; and (2) explosives mixing boosts the production and service of civilian explosives across regions. The entry of Poly will accelerate this process: (1) In the past, the civilian explosion industry was difficult to integrate across provinces. With its core central enterprise advantages and clear group business positioning, the company is expected to lead the horizontal integration of the civilian explosion industry across regions; (2) Poly has a large amount of coal and mineral resources in various regions. In the future, the company is expected to achieve cross-regional explosion production and use through explosives mixing technology, and drive the acceleration of the downstream integration process of civilian explosives. Furthermore, the regional monopoly of the bombing industry will enable the company to benefit in the long term from the liberalization of price controls and the improvement of the marketization process. 2. Valuation side: “integration” + “internationalization”, the prototype of an international civil explosion giant is beginning to take shape. According to the Group's internal positioning, it is estimated that within 3-5 years, the Poly Group will lead the mergers and acquisitions of the domestic explosion industry, and explosives production capacity is expected to reach about 20% of the market share (corresponding to the certified production capacity of about 1 million tons); while more market space comes from integrated services and international expansion: (1) Vertical integration: the domestic demand for explosives of more than 4 million tons corresponds to an integrated blasting service volume of more than 400 billion, accounting for less than 5%. However, Poly's strategic position is to be an integrated provider for civilian explosions. Relying on Poly's large domestic and overseas energy assets and business, Jiulian's vertical integration of civilian explosions is expected to accelerate. (2) Internationalization: Poly Science and Trade's military exports account for more than 50% of the market share, and its strength is far ahead. With the help of Poly channels, Jiulian Development is expected to greatly expand overseas civilian bombing and blasting business through exports, local construction and mixed production capacity, etc. Furthermore, the infrastructure has not been implemented, and the civilian explosion has taken the lead. With the continuous deepening and implementation of China's “Belt and Road” strategy, the company is expected to gradually become the core beneficiary target. 3. It can be expected that the group's internal resource advantages complement each other. Core subsidiaries such as Poly Energy and Poly Science and Trade under the Poly Group all have business collaborations with Jiulian Development. It is expected that future international expansion will strongly complement Poly Science and Trade, etc. At the same time, Jiulian Group is also the only platform for listed companies under the Poly Group to get involved in the military business, and the integration of related internal resources can be expected in the future. Profit forecast. Based on the diluted share capital of 510 million shares, it is assumed that: (1) the asset injection of Poly Minbang and Yinguang Minbang, and the impact of Panhua Group's asset consolidation; (2) Panhua Group completed the consolidation period for a short period of time within 2015, with little impact on 15 years. According to this, it is estimated that the company's EPS for 2015-2017 will be 0.46, 1.04, and 1.71 yuan, with rapid profit side growth compounding the upward shift in the valuation center. We expect that within 3-5 years, the company will soon join the ranks of world-class pop giants. As an enterprise that has greatly benefited from this round of state-owned enterprise reform, it cannot be missed, and it will continue to be strongly promoted! Risk warning. 1. Demand for civilian explosions has declined. 2. The restructuring process fell short of expectations.