Net profit of shareholders rose 37.4% in the first half of 2021 compared with the same period last year.
Last week, the company announced its expected mid-term results for 2021. Shareholder net profit rose 37.4% in the first half of the year compared with the same period last year, mainly due to the increase in natural gas demand, the outstanding retail performance of industrial and commercial users, and the related gas sales increased by 36.1% compared with the same period last year. Gross profit margin fell 3.8 percentage points year-on-year to 24.1 per cent because of rising costs, and the composite spread (excluding taxes) fell 8.9 per cent year-on-year to 0.51 yuan per square meter.
Cooperation with Zhuhai Port, a strategic shareholder of state-owned enterprises, to develop new energy business, focusing on the rooftop distributed photovoltaic company signed a five-year strategic cooperation agreement with its strategic shareholder Zhuhai Port (000507 SZ) in the middle of last month to explore business cooperation in different new energy areas such as photovoltaic, wind power, energy storage, hydrogen energy and carbon emission reduction. The company recently said that using its own urban / rural gas customer resources, the two sides will focus on the development of rooftop distributed photovoltaic business. According to industry data, the total roof area of industrial agglomeration areas and rural areas in Henan Province reached 200 million square meters and 1.3 billion square meters respectively. The company believes that only the roof distributed photovoltaic market in Henan Province can reach more than 200 billion yuan. We expect some photovoltaic pilot projects to be launched in the future.
The company generally maintains the 2021 development guidelines
The company generally maintains 2021 development guidelines: (1) the cumulative number of gas users has reached more than 5 million; (2) retail sales have increased by 25% compared with the same period last year. The target of gross margin of sales has been adjusted from "keep stable" to "slightly lower". We maintain our profit forecast.
When the company's business cooperation with Zhuhai Port gradually shows concrete results, the company can be predicted to improve in principle.
Reiterate the "Buy" rating
We maintain the target price of HK $10.20 estimated by the discounted Cash flow (DCF) analysis, which corresponds to 8.3 times 2021 price-to-earnings ratio and 27.5% upside. Reiterate the "buy" rating.
Risk tips: (1) project delay, (2) tight natural gas supply, (3) reduced connection fee or cancelled.