JIANGNAN CHEMICAL(002226) 申万宏源·2025-03-14 08:44Investment Rating - The report assigns an "Accumulate" rating for Jiangnan Chemical, marking its first coverage [6][7]. Core Views - Jiangnan Chemical, a platform under the China Ordnance Industry Group, is positioned for long-term growth through both organic and external expansion. The company has a leading industrial explosive production capacity and is expected to benefit from increasing demand in Xinjiang due to coal production growth and opportunities from the Belt and Road Initiative [6][7][21]. - The report highlights a favorable outlook for the civil explosives industry, particularly in the western regions and along the Belt and Road, driven by safety, intelligence, centralization, and integration trends [6][7][40]. - Jiangnan Chemical's industrial explosive capacity is nearly 800,000 tons per year, with a significant presence in Xinjiang. The company is expected to continue benefiting from asset injections from the Ordnance Group and has a strong overseas market presence [6][7][26]. Financial Data and Profit Forecast - The projected total revenue for Jiangnan Chemical is 88.95 billion yuan in 2023, with a year-on-year growth rate of 13.8%. By 2026, revenue is expected to reach 139.47 billion yuan, reflecting a growth rate of 32% [2]. - The forecasted net profit attributable to shareholders is 7.73 billion yuan in 2023, with a significant increase to 15.58 billion yuan by 2026, indicating a compound annual growth rate (CAGR) of 26% [2][7]. - Earnings per share (EPS) are projected to grow from 0.29 yuan in 2023 to 0.59 yuan in 2026 [2][7]. Market Data - As of March 13, 2025, Jiangnan Chemical's closing price is 5.88 yuan, with a market capitalization of 15.575 billion yuan [3]. - The company has a price-to-earnings (PE) ratio of approximately 20 in 2023, which is expected to decrease to around 13 by 2025, indicating a valuation below the average PE of comparable companies [2][7]. Industry Dynamics - The civil explosives industry is experiencing consolidation, with the top 10 companies expected to account for over 60% of the market by 2025. The report emphasizes the importance of mergers and acquisitions in enhancing industry concentration [6][56]. - The demand for civil explosives is expected to grow significantly in regions like Xinjiang, driven by coal production and infrastructure projects associated with the Belt and Road Initiative [6][40]. - The report notes that the industry is moving towards a service-oriented model, with an increasing focus on integrated blasting services and the use of digital technologies [6][50].