Key investment points
This week, the average price of liquid air separation gas increased by 1% year-on-year; Rare gas prices continued to rise
1) industrial gas prices continued to rise this week. In the third week of February, retail gas prices rose by 4% year-on-year, slightly larger than that of last week (last week’s year-on-year + 1%). The unit price of liquid oxygen was 440 yuan / ton, down 5%; The unit price of liquid nitrogen was 544 yuan / ton, up 17%; The unit price of liquid argon was 1245 yuan / ton, up 2%.
2) the price of rare gases continues to rise. Affected by the conflict between Russia and Ukraine, the short-term rise of rare gas prices accelerated. By the end of 2021, Ukraine had a production capacity of 350000 m3 / a of neon gas, 10001200 m3 / a of xenon gas and 1100012000 m3 / a of krypton gas, accounting for 72% / 37% / 34% of China’s current production capacity respectively. On February 25, 2022, the ex factory price of krypton gas was 31500 yuan / m3, a year-on-year increase of 266%, an increase of 24% over the beginning of the year, and the ex factory price of xenon gas was 310000 yuan / m3, a year-on-year increase of 237%, an increase of 12% over the beginning of the year.
Industry hot comments:
1) the industrial gas industry has a long slope with thick snow, and the income and profit of Linde gas, the global industrial gas giant, have reached a new record. In 2021, the revenue reached US $30.8 billion, with a year-on-year increase of 13%; The net profit attributable to the parent company was US $3.8 billion, a year-on-year increase of 53%. According to the $13 billion orders in hand, 68% come from the Asia Pacific region, and the potential growth rate is expected to lead other regions in the world in the future. 53% from chemical energy and 30% from electronic industry.
2) China is a big steel country and has the potential to become the world’s largest supplier of rare gases. The short-term price fluctuation caused by the conflict between Russia and Ukraine will benefit China’s industrial gas company. Yingde gas, Hangzhou Oxygen Plant Group Co.Ltd(002430) , Baowu qingneng have arranged large-scale rare gas production capacity, and China will occupy the main share of global rare gas supply after it is put into operation.
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 the leader of industrial gas industry Hangzhou Oxygen Plant Group Co.Ltd(002430) , carbon dioxide leader / electronic special gas Nova Hunan Kaimeite Gases Co.Ltd(002549) , and focus on electronic special gas companies such as Guangdong Huate Gas Co.Ltd(688268) , Jiangsu Yoke Technology Co.Ltd(002409) , Haohua Chemical Science & Technology Corp.Ltd(600378) , Suzhou Jinhong Gas Co.Ltd(688106) .
Hangzhou Oxygen Plant Group Co.Ltd(002430) : optimistic about the continuous improvement of the market share of industrial gas business, expanding gas and refining 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 specialty gas will become a new growth pole
China’s electronic special gas market is 15 billion yuan, with a compound growth rate of about 20%, which is 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 fluctuation of retail gas price
