\u3000\u3 Guocheng Mining Co.Ltd(000688) 106 Suzhou Jinhong Gas Co.Ltd(688106) )
Event: Suzhou Jinhong Gas Co.Ltd(688106) released the annual report of 2021. The company achieved an operating revenue of 1.741 billion yuan, an increase of 40.05% year-on-year, and the net profit attributable to shareholders of listed companies was 167 million yuan, a decrease of 15.34% year-on-year.
Vigorously explore the market and superimpose mergers and acquisitions, resulting in a significant increase in revenue in 2021. In 2021, the revenue of bulk gas, special gas and natural gas business of the company increased by 44.97% / 46.90% / 65.00% respectively year-on-year. During the reporting period, the company acquired a total of 8 companies, contributing an operating revenue of about 185 million yuan, accounting for 10.62% of the overall operating revenue; Excluding M & A, the revenue increased by about 25%. In 2021, the sales volume of the company increased significantly, and the sales volume of bulk gas, special gas and natural gas increased by 19.05% / 103.88% / 26.92% respectively year-on-year; The average price changed by 21.77% / – 27.94% / 30.00% year-on-year respectively.
The rise in raw material prices has led to a decline in gross profit margin. In 2021, due to the significant growth of sales scale, the gross profit of the company expanded accordingly, reaching 522 million yuan, with a gross profit margin of 29.96%. The gross profit margins of bulk gas, special gas and natural gas businesses were 27.21% / 35.46% / 10.73% respectively. As the increase in the price of raw materials was higher than the increase in the average selling price of the company, the comprehensive gross profit margin of the company decreased by 6.51 PCTs, and the gross profit margin of bulk gas, special gas and natural gas decreased by 10.91 PCTs / 2.72 PCTs / 7.82 PCTs respectively.
The expense rate was generally stable during the period, and the fourth quarter profit improved month on month after deducting non recurring factors. In 2021, the company’s expense ratio was 20.05%, with a year-on-year increase of 0.62pcts. Among them, the sales expense rate, management expense rate and financial expense rate are 7.92%, 12.82% and – 0.69% respectively. The company continued to increase R & D investment, and the R & D expense rate increased to 4.01% in 2021. The net profit of the company in 2021 decreased by 17.53% year-on-year, of which the net profit in the fourth quarter was 29.007 million yuan, down 35.85% month on month. However, the company made provision for the impairment of Huai’an Jinhong project of about 19 million yuan in the fourth quarter of 2021. Excluding the impact of non recurring profits and losses, the non net profit deducted in the fourth quarter was about 375449 million yuan, up 55.98% month on month.
The business expansion momentum is good, and the large order expansion is effective at the beginning. During the reporting period, the company added 24000 thousand cubic meters / year of hydrogen, 5000 tons / year of nitrous oxide and 2.68 million bottles / year of filling capacity. It is estimated that five projects of the company will be put into operation in 2022 and three projects will be put into operation in 2023. The company recently signed on-site gas supply contracts with northern integration and core YUENENG, and the annual contribution profits are expected to exceed 17 million yuan and 10 million yuan respectively.
Equity incentive shows confidence, and the 22-year business goal exceeds market expectations. The company’s stock incentive in 2022 takes the growth rate of net profit relative to that in 2021 as the assessment index, and defines the target values of 50% and 100% and the trigger values of 30% and 60% respectively. In 2022, the company’s overall business objective is to achieve a sales revenue of 2.7 billion yuan, with a growth rate of 55.06%; It is planned to realize a net profit of 322 million yuan, with a growth rate of 93.16%.
Profit forecast and Valuation: affected by the rising price of raw materials, the construction progress of Huai’an project does not meet expectations and other factors, we will reduce the net profit from 345 million and 528 million yuan to 264 million and 382 million yuan in 20222023. We expect that the company’s EPS from 2022 to 2024 will be 0.55/0.79/0.99 yuan respectively. The company is a leading private gas company in China with obvious technical advantages. The import substitution of electronic special gas is accelerated. Its development is expected to accelerate in the future and maintain the “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
