Shanxi Blue Flame Holding Company Limited(000968) (000968)
1、 Event overview
On December 28, the company announced that in order to properly solve the problem of horizontal competition with Shanxi coalbed methane Co., Ltd., it plans to be entrusted to manage 100% equity of Shanxi coalbed methane, including 81% equity of Shanxi coalbed methane held by Shanxi Energy Industry Group Co., Ltd. and 19% equity of Shanxi coalbed methane held by Shanxi Gas Industry Group Co., Ltd.
2、 Analysis and judgment
Solve the problem of horizontal competition, build a CBM mining platform in Shanxi Province and enhance competitiveness
Shanxi coalbed methane enterprise has formed a whole industry chain operation mode integrating upstream gas production, midstream liquefaction and downstream trade. It is one of the few coalbed methane development enterprises with gas source blocks in the province, with recoverable reserves of 4.818 billion m3 and design capacity of 260 million m3 / year, about 28.5% of the total sales of coalbed methane in Shanxi Blue Flame Holding Company Limited(000968) 2020. The entrusted management of Shanxi coalbed methane company is conducive to solving the problem of horizontal competition in the coalbed methane industry in Shanxi Province, taking a big step towards building a coalbed methane mining platform in Shanxi Province, which will significantly improve the company’s competitiveness in the coalbed methane industry.
Under the “double carbon” policy, the CBM industry may usher in a new profit model
With the increasingly serious climate problem, carbon emission reduction has become a global consensus, and methane is the second largest greenhouse gas after carbon dioxide. Its greenhouse effect is about 21 times that of carbon dioxide, which is harmful. The direction of emission reduction in various countries has changed from carbon dioxide emission reduction to methane emission reduction. In the future, as methane emission reduction is incorporated into the carbon trading market, CBM enterprises can CCER through methane emission reduction, and the industry profit model may undergo major changes. It is estimated that the unit profitability can be increased by 3 times, and the market scale can be expanded by 31.3 times at most.
The company has the triple advantages of resources + technology + channels, and the moat is wide and thick
(1) The company is rich in coalbed methane resources, and the construction of gas wells promotes the growth of production: the company’s proven geological reserves of coalbed methane are 20.5 billion cubic meters, with 3305 coalbed gas wells, which are rich in resources; Moreover, with the exploration of the new mining area and the operation of the mines under construction, the output is expected to increase rapidly. (2) The company’s CBM mining technology is leading in China: the company’s technical accumulation in CBM theoretical research and practical operation is in a leading position in China. (3) Enhance the pipeline gas supply capacity, improve the utilization rate of coalbed methane and drive the performance growth: with the layout of the company on the coalbed gas pipeline network, the subjective emptying rate of coalbed methane will continue to decline, which will drive the performance growth of the company.
3、 Investment advice
It is estimated that the company will realize a net profit attributable to the parent company of RMB 252 / 256 / 303 million from 2021 to 2023, and the PE corresponding to the closing price on December 30, 2021 is 36 / 35 / 30. The average PE of the company since the beginning of 2021 is 58x, maintaining the “recommended” rating.
4、 Risk tips:
The risk of slow exploration and mining of new mines; Risk of falling CBM price; Risk of insufficient policy support.
