JIANGNAN CHEMICAL(002226) 德邦证券·2024-10-31 09:30Investment Rating - The report gives a "Buy" rating for Jiangnan Chemical (002226.SZ) [1][6]. Core Views - Jiangnan Chemical is a leading player in the civil explosives industry, backed by the Weapon Industry Group, and is positioned for growth through dual-core operations in civil explosives and new energy [34][36]. - The company has a significant production capacity, with explosives capacity reaching 654,500 tons and industrial detonators capacity at 76.7 million units as of H1 2024, placing it at the forefront of the industry [34][36]. - The report highlights the company's strategic acquisitions and asset injections from the Weapon Industry Group, which are expected to enhance its market position and profitability [5][6]. Summary by Sections 1. Industry Leadership and Growth Potential - Jiangnan Chemical, established in 1985, has evolved into a major player in the civil explosives sector, with a history of mergers and acquisitions that have bolstered its production capacity and market presence [34][36]. - The company is actively pursuing further acquisitions, with a commitment from the Weapon Industry Group to achieve overall listing of its civil explosive assets by the end of 2025, indicating ongoing growth potential [34][36]. 2. Market Dynamics and Regional Performance - The civil explosives market in China is experiencing varied performance across regions, with some areas like Xinjiang and Tibet showing significant growth, while others face declines due to high debt risks [3][49][56]. - The report notes that the overall production and sales value of civil explosives in China decreased by 6.64% and 6.18% respectively in the first eight months of 2024, but profits increased by 12.30% [3][49]. 3. Supply Chain and Industry Trends - The civil explosives industry is seeing increased concentration, with expectations for the CR10 concentration to rise from 49% in 2020 to over 60% by 2025, benefiting leading companies like Jiangnan Chemical [4][5]. - The report emphasizes the scarcity of core resources in the industry, which is expected to lead to higher valuations for key players as new capacity approvals are restricted [4][5]. 4. Financial Performance and Forecast - Jiangnan Chemical's revenue has shown a compound annual growth rate (CAGR) of 26.5% from 2015 to 2023, with a projected net profit of 862 million yuan for 2024, reflecting a year-on-year growth of 11.5% [6][40]. - The report forecasts continued growth in net profit for 2025 and 2026, with expected figures of 984 million yuan and 1.255 billion yuan respectively, indicating strong future performance [6][40].