Civil explosive products are mainly industrial explosives and industrial detonators. Qualification barriers and regionality are important characteristics of the industry. Civil explosives are the general name of various industrial explosives and their products, initiation equipment and industrial initiating explosive devices. In order to ensure the safety of scientific research, production, sales, storage, transportation and use of civil explosive equipment, the State implements a special control management access system for the civil explosive industry, so the industry has significant qualification barriers. The principle of “civil explosion” is adopted for the transportation of inflammable and explosive goods in China, and the local transportation of inflammable and explosive goods will be subject to strict supervision. At the same time, the risk of “civil explosion” is obvious, and the local transportation of inflammable and explosive goods will be improved.
Various policies have promoted the upgrading of Intelligent Manufacturing in the civil explosive industry. Manufacturers of civil explosives need to obtain the production license of Civil Explosives for production and operation, and the license renewal cycle is only three years. The renewal of industrial equipment is highly sensitive to policies. In recent years, the state has successively launched a series of industrial policies and guidance, put forward and repeatedly emphasized that the production of civil explosive industry should develop in the direction of less (no) humanization, automation and intelligence. The “14th five year plan” of the civil explosive industry further emphasizes the less (no) humanization, automation and intelligence of the production of the civil explosive industry. It is expected that the civil explosive equipment manufacturers will fully benefit from the equipment renewal demand in the industry.
Driven by policy and high unit price, the electronic detonator market is expected to rise rapidly. The electronic detonator uses the delay module controlled by the chip to replace the chemical delay body in the traditional detonator. Compared with the traditional detonator, the electronic detonator has the advantages of high delay precision, good security and network detectability. In recent years, the Ministry of public security has issued several documents to support the compulsory promotion of electronic detonators based on password management, requiring that the existing detonator products be replaced at a rate of 20% every year from 2019. In addition, the 14th five year plan requires that the production of industrial detonators other than industrial digital electronic detonators should be stopped before the end of June 2022 and the sales of industrial detonators other than industrial digital electronic detonators should be stopped before the end of August 2022. The electronic detonator market has entered a rapid start-up stage. At the same time, the unit price of electronic detonator is more than 5 times that of ordinary detonator, and its market space will be several times that of the existing industrial detonator market.
With the advance of supply side reform, the integration of civil explosives has become a trend, and the leading share will increase. China’s civil explosive industry has long been characterized by low industrial concentration and overcapacity. National policies encourage upstream and downstream enterprises linked by the industrial chain to carry out resource integration and business extension, promote the integration process and promote the improvement of industrial concentration, so as to resolve the problem of overcapacity. During the 13th Five Year Plan period, the number of production enterprises (groups) in the civil explosive industry continued to decrease and the industrial concentration continued to increase; The 14th five year plan proposes that by 2025, the number of production enterprises (groups) in the civil explosive industry will be further reduced to no more than 50, the proportion of the industrial GDP of the top 10 civil explosive enterprises will be further increased to no less than 60%, and a 3-5 large civil explosive integrated enterprise with strong industrial driving force and international competitiveness will be formed. With the continuous promotion of supply side reform and the continuation of the trend of civil explosive integration, it is expected that the industry leaders will benefit significantly.
Investment suggestion: driven by various policies, the prosperity of the civil explosive industry is expected to continue to improve, and the competition pattern is expected to continue to optimize. It is suggested to pay attention to the relevant key companies in the civil explosive industry chain: Poly Union Chemical Holding Group Co.Ltd(002037) , Shanxi Huhua Group Co.Ltd(003002) , Jiangxi Guotai Group Co.Ltd(603977) , Guangdong Hongda, Hunan Nanling Industry Explosive Material Co.Ltd(002096) , Shenzhen King Explorer Science And Technology Corporation(002917) , Hubei Kailong Chemical Group Co.Ltd(002783) , Tibet Gaozheng Explosive Co.Ltd(002827) , Shanxi Tond Chemical Co.Ltd(002360) .
Risk warning: policy implementation is not as expected; Technology upgrading is less than expected; Downside risk of product price
