Industrial gas industry weekly: the decline in the price of liquid air separation gas narrowed, and the price of rare gas continued to rise

Key investment points

Last week, the average price of liquid air separation gas fell 12% year-on-year; Rare gas prices continued to rise

1) the price decline of liquid air separation gas narrowed last week, and the price is expected to bottom out and stabilize gradually. The comprehensive liquid gas price in the first week of February was 522 yuan / ton, a year-on-year decrease of 12% (the price in the fourth week of January was 508 yuan / ton, a year-on-year decrease of 13%). The unit price of liquid oxygen this week was 381 yuan / ton, a year-on-year decrease of 15% and a year-on-year decrease of 33% last week; The unit price of liquid nitrogen was 502 yuan / ton, up 11% year-on-year and down 3% year-on-year last week; The unit price of liquid argon was 845 yuan / ton, down 28% year-on-year and 53% year-on-year last week.

2) the price of carbon dioxide has shown a downward trend since the second half of 2021. On February 11, the average price of carbon dioxide in the past seven days was 345 yuan / ton, down 0.45% month on month and 10.88% year-on-year.

3) the price of rare gas continues to rise. On February 11, 2022, the ex factory price of krypton gas was 30000 yuan / m3 and that of xenon gas was 296000 yuan / m3.

Industry trends:

1) on February 8, Suzhou Jinhong Gas Co.Ltd(688106) signed the “electronic bulk gas supply station construction and gas supply contract” with xinyueneng semiconductor to supply more than 10 kinds of electronic bulk gas. The project is expected to officially supply gas on August 1, 2022.

2) Linde announced that the annual sales of 2021 was 30.8 billion US dollars, an increase of 13% over last year. The increment mainly comes from electronic, chemical and new energy markets. The operating profit in 2021 was US $5 billion, and the adjusted operating profit was US $7.2 billion, an increase of 24% over the same period last year.

Continue to be optimistic about investment opportunities in the industrial gas industry, and the market value of overseas comparable companies is nearly trillion yuan

1) in 2020, the global industrial gas market will reach 135 billion US dollars, with an increase of 8% (gas online). China’s industrial gas market will be nearly 200 billion yuan in 2021, and the CAGR will be about 8% from 2019 to 2021, which is expected to produce a large market capitalization company.

2) the corresponding market value of Linde, Air Liquide and air chemical products of overseas comparable companies is about 100 billion yuan, 500 billion yuan and 400 billion yuan respectively, corresponding to an average PE of about 30 times in 2021.

3) the concentration of China’s air separation gas market is relatively low, Cr4 is about 50%, while overseas is 70%. At the same time, the Chinese share of multinational companies is about 40-50%, and the market share of new projects signed by local enterprises has increased significantly in recent years.

4) the share of independent brands in the special gas market is only 10%, and the domestic substitution trend is obvious and has great potential. We are optimistic about rare gas products as the golden track of electronic special gas, and the price increase logic is expected to continue in the next 3-5 years.

Investment suggestions:

Focus on Jinhe Biotechnology Co.Ltd(002688) key industries such as Shenyang Yuanda Intellectual Industry Group Co.Ltd(002689) gas and {00268430} electronic industry, especially Jinhe Biotechnology Co.Ltd(002688) leading companies.

Hangzhou Oxygen Plant Group Co.Ltd(002430) : optimistic about the continuous improvement of the market share of industrial gas business, and expand gas and refine equipment! The 2021 equity incentive plan was launched, and the issuance of convertible bonds was promoted in an orderly manner to upgrade to an industrial gas leader.

1) the growth rate and sustainability of gas business are expected to exceed market expectations. In 2021, the scale of newly signed gas reached 610000 m3, with a year-on-year growth rate of 118%. We expect that the production and sales volume of the company’s on-site gas production business is expected to reach 3 million m3 in 2025, the revenue will reach 15 billion yuan, and the compound growth rate of revenue will reach 30%.

2) the market expectation of equipment business is too pessimistic, and the periodicity is expected to be greatly weakened. The company’s equipment in hand, full orders, carbon neutralization and other policies will affect the production rhythm of downstream industries, but the long-term demand is still increasing.

Hunan Kaimeite Gases Co.Ltd(002549) : China’s food grade carbon dioxide leader and electronic special gas will become a new growth pole. China’s electronic special gas market will be 15 billion yuan, with a compound growth rate of about 20%, mainly used in integrated circuits (accounting for 70%) and other fields. The localization rate of China’s electronic specialty gas is about 15%, and there is a wide space for domestic substitution. The company started with the rare gas gold track, and the electronic special gas phase II (syngas) project has been settled in Chenzhou, Hunan.

Risk tips

1) the demand of downstream industries is lower than expected; 2) Risk of large fluctuations in retail gas prices.

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