Main points of investment
Event: a few days ago, we communicated with the management of Nanling Civil explosive on the company's business and future development.
The sluggish demand downstream has led to a slowdown in the growth of sales of civil explosive equipment. The lower reaches of the civil explosion industry are mainly coal, mining and infrastructure construction, with mines accounting for nearly 50%, coal accounting for 30%, and others accounting for 20%. The downstream demand of detonators is similar to that of explosives, the difference is that coal mining accounts for a relatively high proportion in the downstream demand of detonators. Due to the macroeconomic downturn, the downstream demand of the civil explosive industry has weakened, resulting in a slowdown in the growth rate of civil explosive equipment sales.
Blasting construction will be the key development direction of civil blasting industry. Due to the sluggish demand downstream, pure production companies will face the pressure of declining performance. Therefore, expanding the industrial chain and marching into the field of blasting has become the direction of the development of the industry. At the same time, due to the problems of management, cost, safety and efficiency, the traditional mine-owned blasting team is more willing to peel off the blasting business, and is more inclined to cooperate with large-scale blasting enterprises to share the benefits of mine blasting. blasting integration and cooperation between mine owners and blasting enterprises have become a new trend in the development of civil blasting industry. The company will create the blasting field with its own characteristics and make the characteristics of Nanling blasting.
The leading position of the region is remarkable, and Chongqing's axe contributes to the growth of performance. At present, the company has an explosive production capacity of 169000 tons, which is mainly distributed in Hunan market, accounting for about 70% of Hunan's production capacity. At the same time, Chongqing Shenax has an explosive production capacity of 22000 tons, which radiates the border areas of Chongqing and Guizhou. The 2013 China report showed that the income outside the province reached 170 million yuan, an increase of 58.31% over the same period last year. We believe that Chongqing Shenax contributed a large amount of revenue. At the same time, in June this year, Chongqing Shenax achieved an additional 10, 000 tons of explosive production capacity (the original 12000 tons). It is expected that the sales volume of the new production capacity is good, which has become the engine of steady growth this year.
Participate in Xinjiang Xuefeng, layout the western market. In 2011, the company signed a strategic cooperation framework agreement with Xinjiang Xuefeng to transfer 15000 tons of explosive production capacity to Xinjiang Xuefeng. In 2012, the company increased capital to Xinjiang Xuefeng, holding a 4.05% stake and actively distributing the Xinjiang market. At the same time, Xinjiang Xuefeng is actively preparing for listing and is expected to achieve a strong return on investment in the future.
Valuation and rating: 2013-2014 earnings per share are expected to be 0.52 yuan and 0.56 yuan respectively, and the corresponding dynamic PE is 22.70 times and 21.20 times respectively, giving the "overweight" rating for the first time.
Risk hints: macroeconomic decline risk; ammonium nitrate price rise risk.