Summary of the report
The company announced a cooperation agreement with CLP Construction. Recently, the company announced the strategic cooperation agreement with Henan Electric Power Survey and Design Institute of China Electric Power Construction Group. The two sides will cooperate in the field of new energy, low-carbon industry, regional comprehensive energy and recharging stations. This is the third cooperative central enterprise announced by the company in two months. Prior to this, the company announced its strategic cooperation agreement with China Energy Saving Building and SPIC, under which the two sides will cooperate in the field of low-carbon comprehensive energy and low-carbon energy in the park, especially in the field of distributed photovoltaic, the company can make effective use of the accumulated resources of township customers and plans to achieve a certain fixed income every year by providing operation and maintenance or engineering services.
Take a two-pronged approach and be optimistic about the future strategic development of the company. The company will deploy new energy sources while natural gas continues to grow. Prior to the announcement of the outline of the new development strategy, the company mentioned that the compound growth rate of the company's overall retail volume in the next three years would not be less than 25%. In 2024, rooftop photovoltaic, gas safety value-added services, wall-mounted furnaces and other innovative services will account for 10% of total revenue. Improve customer conversion rate and ARPU value (average income per household) through innovative business development.
It is reported that at present, the average household income of the company still has a large gap with the industry leader, and there is more room for development in the future. While maintaining the steady growth of the original main business, the company actively develops new business and develops in the direction of a green comprehensive energy company.
Continued share buybacks demonstrate the company's confidence in the future. Since December 2021, the company has carried out a series of share buybacks, with a total of more than 40 million shares, accounting for 4% of the company's total shares. It is also the first time that a listed company has bought back shares since July 2016, indicating management's support for the stock price and confidence in the future.
The performance of gas sales in 2021 is expected to be in line with expectations. We believe that the company's sales guidelines are normal in 2021 and can basically achieve 25% gas growth for the whole year. The gross margin is smooth in the third quarter and may have a certain impact on the gross margin in the fourth quarter due to the rise in upstream gas prices. In the future, the company will actively develop industrial and commercial users, and compared with residential users, industrial and commercial users have a strong advantage in terms of prices, user gas prices are relatively high, and the company will have a trend of rising volume and price in terms of revenue in the future.
Maintain a "buy" rating with a target price of HK $10.61. We maintain the profit forecast for the company in 2022 and expect the core net profit of 2021E-22E to be 990 million yuan and 1.15 billion yuan respectively, while the current stock price corresponds to 7.3x and 6.6x for 2021E-22E P Bank E, respectively, which is more attractive compared with the same industry. Maintain a "buy" rating with a target price of HK $10.61, corresponding to 7.5x for 2022E Pmax E.
Risk hint: gas demand is lower than expected; gross margin is declining; connection completion is not as expected