Yipuli: Civilian Explosion Product Production and Service Integration Champion Enterprise Company was established in 2001. The controlling shareholder is China Gezhouba Group Co., Ltd. The company (Nanling Minbang) was first listed in 2006, and in 2023, Nanling Minbang and Yipuli were reorganized and listed. The company has a “double level” qualification for commercial blasting operations and general contracting of mining engineering construction, and has established a complete industrial chain integrating explosion research, production, sales, blasting services, green mine construction, and general contracting for mine mining construction. It is currently the largest specialized company engaged in on-site mixed explosives production and integrated blasting construction services in China. According to the China Blasting Equipment Industry Association, in the 2023 ranking of civilian explosion manufacturing enterprise groups, the company ranked second in gross domestic product and first in the annual output of industrial explosives.

Downstream fixed asset investment has increased, and benchmark projects stimulate explosive growth. The “14th Five-Year Plan” and the Outline of Long-term Objectives for 2035 clearly proposed expanding investment space through the implementation of major projects such as the Sichuan-Tibet Railway, the new land and sea corridors in the western region, the national water network, and hydropower development in the lower reaches of the Brahmaputra River:

1) The Brahmaputra River accounts for more than half of Tibet's water energy. The downstream “Big Bend” canyon is also an extremely rich hydroenergy resource center. The Brahmaputra River contains 113 million kilowatts of water energy, accounting for about 56.2% of the country, accounting for about 16.3% of the country, second only to the Yangtze River; it is the downstream section of the Ya River with high hydroenergy reserves. Within the 496 km downstream section, it can develop 10-1.1 billion kWh/year of water energy resources per kilometer. Among them, the “Big Bend” canyon is about 240 km long. It is also the place with the highest concentration of hydroenergy resources in the Ya River. In a river with a length of about 240 kilometers, the elevation drops from about 2,880 meters to about 600 meters, if By making full use of the site's hydropower resources to generate electricity, it is estimated that the installed capacity of the corresponding hydropower plant will exceed 40 million kilowatts, and the total investment may exceed trillion dollars.

2) Connect the Yangtze River Pearl River Golden Water System to build the Zhejiang, Jiangxi and Guangdong Canal of the Century Water Transport Project. According to the “Opinions on Promoting the Construction of a Strong Transportation Province” issued by Jiangxi Province, the Zhejiang-Gan-Guangdong Canal consists of the Gan-Yue Canal and the Zhejiang-Jiangxi Canal. The total length of the Ganyue Canal is planned to be about 1,228 kilometers (758 kilometers within Jiangxi), with a planned investment of about 150 billion yuan. The total length of the Zhejiang-Jiangxi Canal is planned to be about 760 kilometers (the total length within Jiangxi is 410 kilometers), and the planned investment is estimated at 170 billion yuan. The Gan-Guangdong Canal connects the Yangtze River system with the Pearl River system, and the Zhejiang-Jiangxi Canal connects the Yangtze River with the Qiantang River. The Zhejiang-Jiangxi Canal is an important part of the “four vertical, four horizontal and two networks” national high-grade waterway network layout plan. It is of great significance in improving the layout of the national high-grade waterway network, forming a new pattern of inland waterway transport, and efficiently connecting the three strategic regions of the Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area.

Supply-side reforms+promotion of mixed explosives may drive the concentration of industry leaders, and lower raw material prices promote profit growth. With the implementation and implementation of the national policy “encouraging upstream and downstream enterprises linked by the industrial chain to carry out resource integration and business expansion”, supply-side reforms in the bombing industry deepened, and the industrial layout continued to be optimized. In 2018, “Opinions on Promoting the High-Quality Development of the Civilian Explosion Industry” proposed promoting the high-quality development of the explosion industry, strengthening safety management, eliminating excess production capacity, and increasing industrial concentration. In 2022, the “Notice on the 14th Five-Year Plan for the Safety Development of the Civilian Explosives Industry” clearly states that at the end of the 14th Five-Year Plan, the number of production groups in the explosion industry will be reduced from 76 to less than 50, and the top 10 explosives companies will account for more than 60% of the gross domestic product of the industry. On the other hand, the unique advantages of mixed explosives may further promote the concentration of industry leaders. As a leading enterprise in the civilian explosives industry, the company is expected to fully benefit from supply-side reforms. Since 2023, the continued decline in ammonium nitrate prices is expected to drive down the cost of explosion products, which in turn will increase the profitability of the industry. It is estimated that in 2024 and 2025, the company will achieve net profit of 710 million yuan and 80 million yuan, corresponding to the current closing price PE is 25.67 and 22.77 times, respectively, with a “buy” rating.

Risk warning

1. The macroeconomic situation falls short of expectations; 2. Raw material price fluctuations fall short of expectations; 3. Production safety falls short of expectations; 4. Changes in overseas markets fall short of expectations; 5. Risk that profit forecasting assumptions are untrue or fall short of expectations.