Pacific Securities: The integration of the civil explosives industry accelerates with steady demand growth

According to the Zhitong Finance APP, Pacific Securities has released a research report stating that the "14th Five-Year Plan" for China's civil explosives industry is nearing completion, with major development goals being well achieved and a significant upward trend in industry concentration. According to data from the China Explosives Industry Association, the industry's gross production value has grown from 27.3 billion yuan in 2015 to 41.695 billion yuan in 2024, with an average annual growth of about 5%. National-level infrastructure projects such as the Yarlung Tsangpo River project and the new shipping channel of the Three Gorges are continuously advancing, coupled with opportunities from the "Belt and Road" initiative, leading enterprises will further strengthen their scale advantages through mergers and acquisitions. The main points of Pacific Securities are as follows: As the "14th Five-Year Plan" comes to an end, major development goals have been well achieved, and the scale advantages of leading enterprises are becoming increasingly apparent, accelerating industry consolidation. The market size of China's civil explosives industry continues to grow steadily and rapidly. According to data from the China Explosives Industry Association, the industry's gross production value has grown from 27.3 billion yuan in 2015 to 41.695 billion yuan in 2024, with an average annual growth of about 5%. Based on the industry’s "14th Five-Year Plan" and the "Implementation Opinions on Accelerating the Transformation and Upgrading of the Civil Explosives Industry," combined with the recent mergers and acquisitions of several leading enterprises, the trend of increasing industry concentration is becoming more evident. Domestic development is stable: steady mining scale + projects such as the Yarlung Tsangpo River project, the new shipping channel of the Three Gorges, and the Zhejiang-Jiangxi-Guangdong Canal drive demand + declining raw material prices. The main downstream application areas of the civil explosives industry, such as non-metallic mineral products (e.g., phosphate rock, fluorite) and metallic mineral products (e.g., copper, aluminum), are operating steadily, which is conducive to the continued improvement of demand in the civil explosives industry. Since 2023, fixed asset investment in public infrastructure such as water conservancy, highways, and railways has maintained growth, providing important support for stable economic growth in China post-pandemic. Major projects like the Yarlung Tsangpo River project, the new shipping channel of the Three Gorges, and the Zhejiang-Jiangxi-Guangdong Canal are all making progress, which is expected to drive demand in the civil explosives industry. Growth in external demand is expected: the "Belt and Road" strategy continues to advance, likely driving civil explosives companies to explore overseas demand. Both the "14th Five-Year Plan" for the civil explosives industry and the "Implementation Opinions on Accelerating the Transformation and Upgrading of the Civil Explosives Industry" clearly elevate internationalization to a strategic height, encouraging civil explosives companies to participate in the "Belt and Road" construction and expand product export scale. Recent data shows that leading domestic civil explosives companies are accelerating their overseas expansion, with companies like JIANGNAN CHEMICAL, Yipuli, Guangdong Hongda, and Yahua Group securing projects in Africa, the Middle East, and South America. Although the current proportion of overseas revenue to total revenue is relatively low, the growth potential is enormous. Recommended focus: Yipuli, JIANGNAN CHEMICAL, Guangdong Hongda, Guotai Group, and Kailong Co., Ltd. Risk warning: Risks of severe fluctuations in the raw material market; risks of downstream demand falling short of expectations; safety production and environmental protection risks