\u3000\u3 Bohai Water Industry Co.Ltd(000605) 090 Jiangxi Jovo Energy Co.Ltd(605090) )
Event:
On April 12, the company released the annual report of 2021, the report of the first quarter of 2022 and the announcement on purchasing 28% equity of Sichuan Huayou Zhonglan Energy Co., Ltd.:
(1) in 2021, the company achieved a revenue of about 18.5 billion yuan, a year-on-year increase of + 107.42%; The net profit attributable to the parent company was about 620 million yuan, a year-on-year increase of – 19.27%; The net profit attributable to the parent company after non deduction was about 640 million yuan, a year-on-year increase of – 16.55%. Among them, Q4 company achieved a revenue of about 6.85 billion yuan in 2021, a year-on-year increase of + 135.82% and a month on month increase of + 36.81%; The net profit attributable to the parent company was about RMB 100 million, with a year-on-year increase of – 92.01% and a month on month increase of – 94.95%; The net profit attributable to the parent company after deducting non profits was about – 20 million yuan, a month on month increase of – 109.11%.
(2) in 2022, Q1 company achieved a revenue of about 7.02 billion yuan, a year-on-year increase of +126.18% and a month on month increase of +2.46%; The net profit attributable to the parent company was about 390 million yuan, with a year-on-year increase of + 40.66% and a month on month increase of + 3570.9%; The net profit attributable to the parent company after non deduction was about 390 million yuan, a year-on-year increase of + 13.46%.
(3) on April 11, 2022, the company signed the transaction contract on the transfer of part of the equity of Sichuan Huayou Zhonglan Energy Co., Ltd. with LanJin energy. The company purchased the 28% equity of Huayou Zhonglan from LanJin energy, and finally negotiated and determined that the transfer price of 28% equity of Huayou Zhonglan was about 230 million yuan.
Comments:
The increase of LNG volume and price has led to a high increase in revenue in 21 years, with significant advantages in the whole industrial chain and a significant increase in Q1 performance in 22 years: the company’s operating revenue increased significantly year-on-year in 2021, mainly due to the significant increase of LNG volume and price and LPG price year-on-year. In terms of LNG, in 2021, the domestic sales volume of the company’s LNG products remained basically stable. At the same time, the company took advantage of its good international credit and independent shipping advantages, made full use of the “price difference, information difference and time difference” in the international LNG market, and expanded the international business scale through the combination strategies of ship trade, current combination, length combination, internal and external combination. The annual sales volume of the company’s LNG products reached 2026000 tons, with a year-on-year increase of 55.77%, The sales revenue reached 9.88 billion yuan, a year-on-year increase of 69.48%, realizing the simultaneous rise of volume and price. In terms of LPG, in 2021, the company focused on exploring the market, continued to consolidate its leading position in the LPG market in South China, and its business competitive advantage continued to increase. In addition, the company accelerated its layout in the chemical raw material market and accelerated structural adjustment. The annual sales volume of LPG products reached 1.773 million tons, a year-on-year increase of 12.44%, and the sales revenue reached 7.81 billion yuan, a year-on-year increase of 64.0%. In terms of profit, affected by factors such as demand growth, geopolitics, unsealing of the epidemic, extreme weather, low natural gas inventory in Europe, insufficient supply of wind and solar power generation, and obstruction of “beixi-2” ventilation, the structural mismatch between international LNG supply and demand has become prominent since 2021, driving the price to rise continuously, resulting in the decline of the company’s profit in 21 years. In 2022q1, the company achieved a revenue of about 7.02 billion yuan, a year-on-year increase of + 126.18%, mainly due to the significant increase in the sales quantity and sales unit price of LNG products compared with the same period of last year, and the large increase in the sales unit price of LPG compared with the same period of last year; Benefiting from the company’s active response to external challenges, the advantages of dual gas source guarantee and the whole industrial chain are highlighted. At the same time, the company has actively explored the market, expanded its business scale against the trend and steadily improved its profitability. In 2022q1, the company realized a net profit attributable to its parent company of about 390 million yuan, a year-on-year increase of 40.66% and a month on month increase of 3571%.
Under the background of carbon neutralization and accelerated energy transformation, natural gas has broad development space in the future: as a fossil energy with high calorific value and low carbon emission, the carbon emission per unit calorific value of natural gas is only about 60% of that of coal. We believe that under the constraints of China’s dual carbon goal, natural gas, as a clean primary fossil energy, will be an important tool for China to slow down the growth rate of carbon emissions. On the premise that the proportion of non fossil energy use has not increased significantly, natural gas will play an important role in China’s “carbon neutralization road”. At present, the national and local governments at all levels have successively issued relevant policies to encourage the use of clean energy such as natural gas. For new projects, it is required to give priority to the use of clean energy, implement the “coal to gas” in key energy fields (such as residential energy, industrial and commercial energy, etc.), and replace coal, heavy oil, diesel and other highly polluting fuels with natural gas. China’s natural gas demand shows a growth trend. It is expected that China’s natural gas will have broad development space in the future. The optimization of Chinese customer structure, the continuous expansion of resource pool and the continuous improvement of the quality of LNG business development of the company: facing the complex international and Chinese situation, the company gives full play to its advantages of the whole industrial chain, takes the optimization of Chinese customer structure and the expansion of resource pool as two important starting points, and continuously strengthens the service capacity and the competitiveness of LNG products. In 2021, the sales volume of direct end users such as industrial (Park) users, gas power plants and key customers accounted for more than 70% of the company’s sales volume in China; At the same time, middleman customers represented by urban gas and traders have become an important supplement to sales, and the company’s customer structure and quality have been significantly optimized and improved. Meanwhile, the company has insisted on making the “Sea gas resource pool” bigger, and the scale of international business has expanded significantly. LNG products have been landed in China, Taiwan, Korea and India. The potential of “long gas plus spot gas” has been fully released, laying a good resource base for further expanding China’s sales scale in the future. In addition, relying on the LNG business development strategy of “land, to the terminal and out of South China”, the company continues to increase the construction of “land gas resource pool”, actively expand markets outside South China with the help of the layout of “land resource pool”, and continuously improve the development quality of LNG business.
LPG demand continues to grow steadily. The company has accelerated the layout of chemical raw material gas, with strong development momentum: since 2011, China’s LPG demand has maintained a steady growth trend, and the average annual compound growth rate of apparent consumption from 2011 to 2020 is 11.3%. In 2021, China’s apparent consumption of LPG reached 69.88 million tons, a year-on-year increase of 10.59%. Chemical raw material gas is the LPG consumption with the highest proportion, and it is also the main increment of China’s LPG market. Influenced by the development of light chemical raw materials in China in recent years, LPG is widely used as raw materials with better economy and environmental protection than petroleum brain, coal and other raw materials; With the continuous expansion of the capacity of LPG deep processing unit, the demand for LPG for chemical raw materials shows a continuous growth trend. In 2021, the company established a special chemical business team in Shandong to accelerate the layout of the chemical raw material gas market and achieved phased results. In addition, in September 2021, the company signed a cooperation agreement with juzhengyuan, a PDH production supplier, to jointly invest in the low-temperature propane interconnection project, and officially entered the chemical raw material gas market through this cooperation. With the accelerated layout of the company in the chemical raw material gas market, it is expected that the LPG business of the company will obtain strong development momentum in the future.
Acquire 28% equity of Huayou Zhonglan and further expand inland gas sources: located in Bazhong City, Sichuan Province, Huayou Zhonglan covers an area of 355 Mu and focuses on the production, circulation and sales of onshore LNG. The LNG liquefaction capacity in operation in phase I is 1.5 million m3 / day (equivalent to 300000 tons / year), and the LNG liquefaction capacity in phase II is planned to be 1.5 million m3 / day. At present, land acquisition and public auxiliary engineering construction have been completed. It is the largest single natural gas liquefaction plant in Southwest China, It is an important LNG supplier in the region.
In terms of upstream resources, at present, the upstream natural gas resources of PetroChina Zhonglan come from Yuanba gas field. They are downloaded from Kaimen station through valve chamber 4 of the connecting line of Sichuan East Gas Transmission (the valve chamber is about 70m away from the plant boundary of the target company), which has sufficient gas source guarantee and certain procurement cost advantages. By acquiring the equity of PetroChina Zhonglan, the company will gain an important fulcrum in “land gas” resources, initially form a dual gas source pattern of “Sea gas + land gas”, indirectly realize cross regional development, expand the market radiation to some regions such as Sichuan, Shaanxi and Hubei, and indirectly cut into the automobile gas filling market according to the system of PetroChina Zhonglan gas filling station to broaden the field of terminal application, Promote the further implementation of the LNG business development strategy of “on land, to the terminal and out of South China”.
The advantages of entering the hydrogen energy field are obvious, and the future development of the company can be expected: in December 2021, the company announced that it plans to establish a joint venture with juzhengyuan to carry out hydrogen energy industry development cooperation, and make full use of the by-product hydrogen resources of juzhengyuan polypropylene project to enter the hydrogen energy field. Relying on LNG and LPG business, the company has obvious inherent advantages in participating in hydrogen energy industry and has resource and cost advantages in hydrogen production from fossil energy. At present, the hydrogen energy layout preliminarily determined by the company includes the development and introduction of hydrogen production and purification technology, the purification of hydrogen by-product of PDH unit, hydrogen production by natural gas reforming, hydrogen production by electrolytic water, etc. At the same time, the company pays close attention to the implementation of hydrogen energy policy and the changes in the hydrogen fuel cell vehicle market. According to the potential market demand, the company actively arranges the hydrogen production by natural gas reforming and electrolytic water, provides the market with large-scale and low-cost transportation fuel parity hydrogen, and creates a new performance growth point in the future. Profit forecast, valuation and rating: considering the sharp rise in the international LNG price and the increase in the company’s cost pressure, we lowered the company’s profit forecast for 20222023 and added the profit forecast for 2024. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 1.064 billion yuan (down 24%), 1.257 billion yuan (down 31%) and 1.518 billion yuan respectively, and the converted EPS will be 240, 2.84 and 3.43 yuan / share respectively. Since 2021, the company has continuously promoted the strategy of “landing, reaching the terminal and leaving South China”, continuously optimized the LNG and LPG businesses, entered the hydrogen energy field and cultivated new performance growth points, with strong development momentum in the future. We still maintain the company’s “buy” rating.
Risk tip: the price of raw materials and products fluctuates, the downstream demand is less than expected, the risk of capacity construction, R & D risk, and the market expansion of new products are less than expected.
