To reduce the material cost and improve the stability and safety, the porous granular ammonium nitrate and fuel oil (ANFO) explosive was prepared by partially or fully substitution of a mixture of micro-meter coal powder and water (the volume ratio of coal powder and water slurry is 1:1) for diesel oil. Through experimental testing, the optimal formula with the maximum detonation velocity was obtained. The friction sensitivity of the emulsion explosive was studied using a friction sensitivity tester, and the effect of coal powder on the thermal decomposition reaction of porous granular ANFO explosive was studied using a C80 micro-thermal analyzer. The kinetics and thermodynamics parameters of thermal decomposition reaction for different samples were calculated using Arrhenius equation based on the thermal flow curve data. Results show that the explosive prepared with a mixture of 10% coal powder water slurry and 2% diesel oil has the highest detonation velocity of 3227m/s. The friction sensitivity of the explosive is the highest, with a maximum probability of ignition of 4%. The coal powder water slurry inhibits the thermal decomposition reaction of porous granular ANFO explosive. The apparent activation energy, pre-exponential factor, and initial decomposition temperature of the explosive prepared with the coal powder water slurry are higher than those of the pure diesel oil porous granular ANFO explosive. The new-made explosive prepared by partially or fully substitution of the coal powder water slurry for diesel oil has better thermal stability.