I. Overview of events
On December 28, the company announced that in order to properly solve the problem of inter-industry competition with Shanxi CBM Co., Ltd., it intends to be entrusted with managing 100% of the equity of Shanxi CBM, including 81% of Shanxi CBM held by Shanxi Energy Industry Group Co., Ltd and 19% of Shanxi CBM held by Shanxi Gas Industry Group Co., Ltd.
II. Analysis and judgment
Solve the problem of inter-industry competition, build Shanxi coalbed methane production platform, enhance competitiveness Shanxi coalbed methane enterprises have formed a whole industry chain operation mode, which includes coalbed methane upstream gas production, middle reaches liquefaction and downstream trade. it is one of the few coalbed methane development enterprises in the province with gas source blocks, with recoverable reserves of 4.818 billion square meters and design capacity of 260 million square meters per year. About 28.5% of Blue Flame Holdings's total coalbed methane sales in 2020. The entrusted management of Shanxi coalbed methane company is conducive to solving the problem of inter-industry competition in Shanxi coalbed methane industry, and has taken a big step in building a coalbed methane mining platform in Shanxi province, which will significantly enhance the company's competitiveness in the coalbed methane industry.
Under the "double carbon" policy, the coalbed methane industry may usher in a new profit model. As the climate problem is becoming more and more serious, carbon reduction has become a global consensus. Methane is the second largest greenhouse gas after carbon dioxide, and Greenhouse Effect is about 21 times that of carbon dioxide. Countries have changed the direction of emission reduction from carbon dioxide reduction to methane emission reduction. In the future, as methane emission reduction is included in the carbon trading market, coalbed methane enterprises can CCER through methane emission reduction, and major changes may take place in the profit model of the industry. It is estimated that the unit profitability can be increased by three times, and the market size can be expanded by a maximum of 31.3 times.
The company has triple advantages of resources, technology and channels, and the moat is wide and thick. (1) the company is rich in coalbed methane resources, and gas well construction promotes production growth: the company has proven coalbed methane reserves of 20.5 billion cubic meters and has 3305 coalbed methane wells, which is rich in resources; and with the exploration of new mining areas and the commissioning of mines under construction, production is expected to increase rapidly. (2) the company leads the domestic coalbed methane production technology: the company's technology accumulation in the theoretical research and practical operation of coalbed methane is in the leading position in the country. (3) enhance the gas supply capacity of the pipeline, improve the utilization rate of coalbed methane, and promote the growth of performance: with the layout of the company in the coal seam pipe network, the subjective emptying rate of coalbed methane will continue to decline, which will lead to the growth of the company's performance.
III. Investment suggestions
From 2021 to 2023, the company is expected to achieve a home net profit of 2.52 million yuan. The PE corresponding to the closing price on December 30, 2021 is 36-35-30. The average PE of the company since the beginning of 2021 is 58X, maintaining the "recommended" rating.
Fourth, risk tips:
The risk of slow exploration and exploitation of new mines; the risk of falling coalbed methane prices; the risk of insufficient policy support.