\u3000\u30 China Baoan Group Co.Ltd(000009) 68 Shanxi Blue Flame Holding Company Limited(000968) )
Event: on April 21, 2022, the company released the first quarterly report of 2021 and 2022. The net profit attributable to the owner of the parent company in 2021 was 305 million yuan, a year-on-year increase of 144.36%. In the first quarter, the net profit attributable to the owners of the parent company was 272 million yuan, a year-on-year increase of 168.34%.
The volume and price of coal-bed methane business rose together, which promoted the release of the company’s performance in 2021. Increase market development efforts to ensure that the CBM should be sold to the full. In 2021, the sales volume of CBM will reach 1.099 billion cubic meters, with a year-on-year increase of 20.5%, promoting the steady improvement of the company’s economic benefits. The sales revenue of unit coalbed methane was 1.78 yuan / m3, with a year-on-year increase of 14.5%. The unit cost was 1.22 yuan / m3, a year-on-year increase of 1.4%. Benefiting from cost control and rising prices, the company’s CBM mining business achieved a gross profit margin of 336.86%, an increase of 8.16 percentage points year-on-year.
Subsidies increased significantly, and the performance of 22q1 exceeded expectations. While the company focused on the development of its main business, took multiple measures to deeply tap the production potential, strengthened market development, and steadily increased the unit price, sales volume and sales revenue of coalbed methane in the first quarter, the company confirmed that the subsidy for coalbed methane was 176 million yuan, an increase of about 172 million year-on-year. After deducting subsidies, the company’s profit was 96 million yuan, which was basically the same as that after deducting subsidies in the same period last year.
Abundant resource reserves, coal-bed methane production is expected to continue. The company is rich in coalbed methane resources and is constantly increasing: in 2021, the company obtained 5 coalbed methane exploration rights and currently holds 22 coalbed methane mining rights, with a total area of 2680 square kilometers. The opening of the new block can accelerate the pace of increasing reserves and production, and help to improve the competitiveness and sustainable development ability of the company’s CBM industry.
Oil and gas prices rise, and the company’s comprehensive selling price is expected to rise. Affected by strong overseas demand and the repeated situation in Russia and Ukraine, overseas oil and gas prices rose sharply. According to wind data, the average price of 22q1 Brent crude oil increased by 65.26% year-on-year to US $100.87/barrel, and the average price of NYMEX natural gas 22q1 was US $4.57/million BTU, an increase of 67.91% year-on-year. Driven by overseas prices, China’s LNG prices also rose sharply. According to wind data, the LNG price in the location of 22q1 company (Jincheng, Shanxi) rose 73.62% year-on-year. Affected by this, the company’s comprehensive selling price is expected to rise.
Driven by the goal of “double carbon”, it is of great significance to vigorously develop the coalbed methane industry. The greenhouse effect of methane contained in coalbed methane is 21 times that of carbon dioxide. Every 100 million cubic meters of methane emission reduction is equivalent to 1.5 million tons of carbon dioxide emission reduction. Large scale surface extraction and utilization of coalbed methane for coal mine gas control can reduce the release of methane during coal mining. It can also develop and utilize the gas in coal mine goaf and abandoned mines to reduce the damage of methane emission to the ozone layer. At the same time, replacing high emission intensity energy with low emission intensity energy is an effective way to realize carbon neutralization. The carbon emission intensity of coalbed methane is lower than that of coal and oil. Its large-scale extraction and utilization will play an important role in realizing the “double carbon goal” in China.
Investment suggestion: we estimate that the net profit attributable to the parent company from 2022 to 2024 will be RMB 738 / 980 / 1099 million, the corresponding EPS will be 0.76/1.01/1.14 respectively, and the corresponding PE on April 21, 2022 will be 15 times, 11 times and 10 times respectively. Maintain a “recommended” rating.
Risk warning: the risk of slow exploration and mining of new mines; The risk of falling coalbed methane prices; The risk of insufficient policy support.
