Event: on January 30, 2023, the company issued an announcement of annual performance increase in 2022. The company expects that in 2022, the net profit attributable to shareholders of listed companies will be 500.60 billion yuan, an increase of 63.86% to 96.63% over the same period last year; after deducting non-recurrent profits and losses, the net profit will be 480,5.8 million yuan, an increase of 69.07% and 104.23% over the same period last year.
22Q4 Company realized a net profit of 0.41 billion yuan from 0.41 billion to 14.4 billion yuan. According to the announcement, in the fourth quarter of 2022, the company achieved a net profit of 0.41 billion yuan, a year-on-year change of-45.68% and 87.93%, a quarter-on-quarter change of-56.43% and 50.75%, and a deduction of 0.39% and 139 million yuan, a year-on-year change of-33.94% and 136.12%, and a quarter-on-quarter change of-49.26% and 81.36%.
The sales volume and price of coalbed methane have risen, and the increase of reserves has been approved to help the company continue to grow. The conflict between Russia and Ukraine accelerated the rise in global natural gas prices in 2022. According to wind data, the average ex-factory price of LNG in China in 2022 was 6914 yuan / ton, an increase of 41.87% over the same period last year. Among them, the average ex-factory price of LNG in Shanxi, where the company is located, was 6389 yuan / ton, an increase of 41.64% over the same period last year. In this context, the company focused on increasing storage and production, constantly expanding sales channels, coalbed methane sales prices rose throughout the year, and the profitability of the main business was significantly enhanced. In December 2022, the company announced that the new reports on coalbed methane proven reserves in Heshuangling, Wuxiang South and Liulin Shixi blocks were reviewed and put on record by the Shanxi Provincial Department of Natural Resources, with an additional proved reserves of 22.866 billion cubic meters, compared with the proven geological reserves in June 2021. the company's coalbed methane reserves have doubled. In addition, the amount of government subsidies for coalbed methane extraction and utilization received and confirmed by the company in 2022 increased significantly compared with the same period last year. By the end of the third quarter, the company's other income was 222 million yuan, an increase of 876.62% over the same period last year, which was another factor in the company's performance growth.
Backed by Huaxin gas, the storage and transportation advantage is strong. Jin Control equipment, the controlling shareholder of the company, transferred 40.05% of the company's equity to Shanxi Gas Group. At present, the transfer of shares is under way. Among them, the production and operation of Shanxi Gas Group and other shareholders' rights belong to Huaxin Gas. Thus Blue Flame Holdings can borrow the industrial resources of Lihua New Gas. According to Huaxin Gas's official website, it has more than 6400 kilometers of long-distance pipelines and a gas transmission capacity of 30 billion square meters per year. It has built 17 liquid chemical plants with a daily liquefaction capacity of 7.6 million cubic meters and a total gas storage capacity of about 96 million cubic meters, accounting for more than 50 percent of the province. Its rich pipe network resources and excellent gas storage and peak shaving capacity are expected to help Blue Flame Holdings to further enhance gas supply storage and transportation capacity and broaden sales channel resources.
Investment suggestion: the company distributes the integrated industry chain of coalbed methane upstream, middle and downstream, and the company's reserves and pipeline resources have been further strengthened. We estimate that the company's homing net profit from 2022 to 2024 will be RMB 5.61 million, RMB 7.20, respectively, and the EPS will be RMB 1.07 per share, respectively, corresponding to the PE of January 30, 2023, which will be 16 times, 12 times and 8 times respectively, maintaining the "recommended" rating.
Risk hints: the risk of coalbed methane price decline; the risk of gas well exploration and production not up to expectations; the risk of insufficient policy support.