\u3000\u3000 Shanxi Blue Flame Holding Company Limited(000968) (000968)
Event: on January 21, 2022, the company released the annual performance forecast for 2021. It is estimated that the net profit attributable to the parent company will reach 260-330 million yuan in 2021, a year-on-year increase of + 108.21% – 164.27%; The net profit deducted from non parent company was 240-310 million yuan, a year-on-year increase of + 199.46% – 287.31%; The basic earnings per share was 0.27-0.34 yuan / share, with a year-on-year increase of 1.14-1.21 yuan / share.
The company’s performance is more flexible under the background of higher than expected performance and rising gas price. According to the calculation, the company realized a net profit attributable to the parent company of 30-100 million yuan in the fourth quarter of 2021, with an average of 65 million yuan, slightly higher than the level of 2021q3, maintaining stable growth. Overall, the company’s performance in 2021 exceeded our previous forecast and Wande’s consistent expectation. The company’s performance increased significantly compared with that in 2020, mainly due to the simultaneous rise in the volume and price of main CBM business: in terms of sales volume, the sales volume of CBM in 2021 was 1.099 billion cubic meters, a year-on-year increase of 20.5%; In terms of price, benefiting from the impact of China’s LNG rise in 2021, the company’s CBM sales unit price increased. We believe that the company focuses on the sales of coalbed methane. Under the background of the rise of gas price from the beginning of 2021, the performance is flexible. When the gas price is expected to remain at a medium high level in 2022, the performance can continue to grow.
With the triple advantages of resources + technology + channels, the production of coalbed methane is expected to continue. (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.
Looking forward to 2022, profitability is expected to continue to improve. In terms of price, under the “double carbon” and “coal to gas” policies, China’s natural gas demand has increased steadily. With the promotion of market-oriented reform of natural gas price, the company’s CBM price (especially LNG) is expected to increase steadily. In terms of production, the company focused on the development of its main business and focused on increasing reserves and production. By the end of 2020, the company’s projects under construction were mainly CBM projects, with a planned total investment of 8.299 billion yuan and a cumulative investment of 3.857 billion yuan. With the completion and operation of the company’s CBM projects under construction in 2021-2022, the company’s CBM production is expected to increase rapidly. In terms of utilization rate, with the growth of downstream demand and the construction of pipe network transportation, the subjective emptying rate is expected to continue to decline.
Investment suggestion: considering that the sales volume of coalbed methane in the company’s performance forecast in 2021 is higher than the previous expectation and in combination with the current natural gas price trend, we raised the company’s net profit attributable to the parent company from 2021 to 2023 to RMB 284 / 297 / 313 million, corresponding to 29 / 27 / 26 times of the closing price on January 21, 2022. Considering that the company’s business is expected to continue to realize the simultaneous rise of volume and price under the background of rising natural gas demand, Moreover, the moat of the company is wide and thick, maintaining the “recommended” rating.
Risk warning: the risk of slow exploration and mining of new mines; Risk of falling CBM price; Risk of insufficient policy support.
