\u3000\u3000 Suzhou Jinhong Gas Co.Ltd(688106) (688106)
Event:
On February 8, 2022, the company signed a supply contract with Guangdong core YUENENG Semiconductor Co., Ltd. with a contract amount of about 1 billion yuan (excluding tax) to supply electronic bulk gases such as general nitrogen, high-purity nitrogen, ordinary oxygen, high-purity oxygen, argon, hydrogen, helium, carbon dioxide, compressed air and high-pressure compressed air; It is expected to officially supply gas on August 1, 2022, and the performance period is until September 30, 2042.
Comments:
New orders are expected to increase the company’s net profit by more than 10 million yuan per year
According to our calculation, if the company starts formal gas supply on August 1, 2022, the gas supply capacity will have a climbing period of half a year to one year, and reach full production after September 30, 2023, the annual income will be about 52.63 million yuan by the end of contract performance, At the same time, it is expected that the net profit rate is expected to be more than 20% (from 2018 to the first three quarters of 2021, the average net profit rate of the company is 14.01%, while a certain proportion of high-purity gas is also supplied in the contract, and the actual net profit and corresponding net profit rate may be higher), which corresponds to the net profit contribution of more than 10 million / year, which has significantly thickened the company’s revenue and profit.
The market scale of China’s industrial gas industry is expanding rapidly, and the CAGR will be more than 10% in the next five years
China’s industrial gas industry is in the stage of rapid development. According to the data of prospective industry research institute, the industry market scale reached 147.7 billion yuan in 2019, and the CAGR in 2014-2019 was 10.46%. It is expected that China’s industrial gas market scale will reach 322.1 billion yuan by 2026, and the CAGR in 2019-2026 is expected to be 11.78%. In the downstream application of industrial gas, the proportion of industrial gas application in electronic products continues to increase, from 8.24% in 2014 to 10.56% in 2019. It is expected that the market scale of electronic special gas for chip will reach 13.4 billion yuan by 2025, and the CAGR is expected to be 12.01% from 2020 to 2025.
The on-site gas production business has a long gas supply cycle and a more stable cooperative relationship. The company is expected to benefit from the increasing proportion of on-site gas production mode in China
According to the data of prospective industry research institute, the proportion of China’s third-party on-site gas making mode in the overall on-site gas making was about 55% in 2019 and 57% in 2020. There is still a large gap compared with 80% in developed countries. It is expected that the proportion of China’s on-site gas making mode will continue to increase in the future. Since the fourth quarter of 2021, the company has successively signed on-site gas manufacturing contracts with northern integration and Guangdong core YUENENG, with the contract amount of 1.2 billion yuan and 1 billion yuan respectively, and the cooperation cycle is about 15 and 20 years respectively. Generally, electronic bulk gas is exclusively supplied and operated by only one supplier, with good sustainability of profits. This time, it has won another big order, It proves that the company’s strategy of entering the electronic bulk gas business through the electronic special gas business is successful.
Profit forecast and Valuation: it is estimated that the company’s EPS from 2021 to 2023 will be 0.45/0.71/1.09 yuan respectively, and the current price corresponding to PE will be 59.67/37.82/24.76 times respectively. The company is a leading private gas company in China, with obvious technical advantages and accelerated import substitution of electronic special gas. The company is expected to accelerate its development in the future, with a target price of 38.1 yuan and maintain a “buy” rating.
Risk warning: the price of raw materials fluctuates sharply; Brain drain risk; Market development is less than expected; Contract performance risk and default risk
