EXPL(002096) Soochow Securities·2024-10-24 07:30Investment Rating - The report assigns an "Accumulate" rating for the company, marking its first coverage [1]. Core Views - The company, Yipuli, is a leading player in the domestic civil explosives and mining services industry, benefiting from fiscal stimulus [2]. - The civil explosives industry is experiencing a clear trend of increasing concentration, with significant demand expected from mining and infrastructure projects, particularly in the western regions and under the Belt and Road Initiative [2]. - Following the merger with Nanling Explosives, the company's market position has been further solidified, allowing it to capitalize on opportunities in Xinjiang's coal mining and overseas projects [2]. Summary by Sections Company Overview - Yipuli, established in 1993, is the only civil explosives platform under China Energy Engineering Group and has expanded its market presence through mergers and acquisitions [2][24]. - The company achieved a revenue of 8.43 billion yuan and a net profit of 630 million yuan in 2023 after its restructuring [2]. Industry Trends - The civil explosives industry has seen a 14.2% increase in revenue and a 40.3% increase in profit in 2023, with the blasting service sector growing at a compound annual growth rate (CAGR) of 18% from 2019 to 2023 [2]. - The demand for civil explosives is driven by mining activities, which account for over 70% of industrial explosive consumption in China, and the government's recent announcements of targeted fiscal policies to boost investment [2]. Market Position and Capacity - Post-merger, Yipuli's market share in blasting services has increased significantly, with a production capacity of 521,500 tons of industrial explosives, the highest in the country [2][30]. - The company has secured numerous contracts in Xinjiang, with a focus on large coal mining projects, and has expanded its overseas operations in countries like Liberia and Pakistan [2]. Financial Forecast and Valuation - The report forecasts Yipuli's net profits for 2024, 2025, and 2026 to be 760 million, 890 million, and 1,030 million yuan respectively, with corresponding price-to-earnings ratios of 21.16, 18.11, and 15.64 [1][2]. - The company is expected to enjoy a valuation premium due to its leading position in the civil explosives sector and its growth potential in Xinjiang and international markets [2].