Event:
According to data from the national statistical office, investment in infrastructure (excluding electricity, heat, gas and water production and supply) increased at a rate of 7. 3 per cent in the first half of 2018, a significant decline from 21. 1 per cent in the same period in 2017. Http://www. Hibor. Com. Cn/weibo investment information, 23 july 2018, the state council convened a general meeting, which stated: “accelerating the issuance and use of $1. 35 trillion in local government-specific bonds this year, with early results in promoting ongoing infrastructure projects”. Http://www. Hibor. Com. Cn
With the benefits of policy, companies linked to the industrial chain of infrastructure investment are expected to benefit。Reming scienceIt is the anhui province people's explosives enterprise, which now has 83,000 tons of industrial explosives, 120 million tons of industrial detonators, and three construction quarries, with a combined resource reserve of over 75 million tons, with a projected ceiling of 12 million tons per year. The company's owner's civilian explosives products are used extensively in mining, metallurgy, transport, water, electricity, construction and oil, and have an irreplaceable role in basic industries, major infrastructure construction。
In the first quarter of 2018, the operational income from rememinalization was $169 million, a decrease of 9. 02 per cent over the same period, while the net profits attributable to the parent company were 1,321. 98 million, a decrease of 1. 97 per cent over the same period and an increase of 22. 57 per cent over the same period, net profits from non-recurring gains and losses of approximately 12. 30. 79 million。
Investment highlights:
Companies operate in civilian explosions and are upstream in the capital industry. The company, anhui province, is a civilian explosive enterprise with 83,000 tons of industrial explosives, 120 million rounds of industrial detonators and three construction quarries, with a combined resource stock of over 75 million tons, with a post-partum production ceiling of 12 million tons per ton. The owner of the company has extensive use in mining, metallurgical, transport, water, electricity, construction and oil, and has an irreplaceable role in basic industry, major infrastructure development。
The high level of mineral operations is a new profit-growing point for companies. In november 2015, the company competed for $435 million to acquire rights to limestone mining rights in three buildings in xiaozhou, huaibei city, and cut into the production and sale of sandstone bone. The demand for sandstone bones is highly related to infrastructure areas such as roads, railways and bridges, with a wide demand, but with a transport radius of less than 200 km, with clear regional characteristics of prices. The company had come into production in 2017 and was now in the markets of radiation amphibious, henan, etc., with good future demand。
At the supply end, small and medium-sized bone companies produced ecological damage, causing geological disasters such as collapses and landslides. In 2013, governments began to promote sustained industrial integration, with a significant reduction in the number of enterprises, a contraction in supply that left sandstone bone supplies short of demand and a significant increase in product prices. According to data from china's sandstone network, the prices of sandstone (10-30 nm) in the china-china region (the main market area for corporate sandstone bones) in 2018 rose from 48 yuan/tonne in january to 85 yuan/tonne in june, a six-month increase of 77 per cent. With the gradual increase in the production of the company's sandstone bones, the profitability of mineral operations is expected to increase significantly。
The asset injection was approved and the group coal & coke assets are expected to be listed. On 12 july, the company issued a communiqué stating that “the company may issue shares and pay cash to purchase assets and collect supporting funds and related transactions with conditional passage by the csrc”. According to the company's reorganization plan, coal and coke assets under the parent company, the light minerals group, will be injected into the listed company platform as a whole, and the main business of thundering science will turn into coal mining and charging, but the original civilian explosion will remain. Lower coal industry fire, steel and construction materials are closely linked to infrastructure development, and the recovery in capital demand will benefit the company's coal and coke operations。
Profit projections and investment ratings. The company is mainly involved in the development, production and sale of civilian explosives and is one of the more integrated industries in the domestic explosives industry. In the context of the gradual landing of capital policies throughout the country, we look forward to the development of corporate boom operations and the injection of high-quality assets of the group. Based on the principle of financial prudence, we do not consider the financial impact on the company of the injection of assets into the parent company, which is expected to have an eps of 0. 46, 0. 89 and 1. 12 yuan/equity for the period 2018-2020, with a pe of 23. 28, 12. 15 and 9. 68 times the current equity price. First-time coverage with “buy-in” rating。
Risk tips: capital policy falls short of expectations; sandstone bone is produced below expectations; safe production risks; asset injection is less advanced than expected。
