Incidents:
The 2016 mid-year report was released. The company's revenue for the first half of the year was 233 million yuan, an increase of 13.59% over the previous year; Guimu's net profit was 6.57 million yuan, a year-on-year decrease of 4.82%.
Commentary:
Complete termination of retail business, steady increase in net profit after deduction
The company announced the termination of its retail business in June, generating 1.82 million yuan of non-operating expenses such as merchant compensation in the first half of the year, which led to a slight decline in net profit for the first half of the year compared to last year.
Net profit returned to the mother after deducting non-recurring profit and loss was 7.88 million yuan, an increase of 15.64% over the previous year.
Revenue increased 13.59% as the company added two natural gas subsidiaries, Jingneng and Luojiang, during the reporting period. Financial expenses increased by about 3.8 million yuan over the same period last year, an increase of 160.46% due to a decrease in deposits and an increase in interest expenses after new loans were added.
It acquired Jingneng and Luojiang Natural Gas Company, and fully transformed into a comprehensive natural gas service provider. In the first half of 2016, the company completed the acquisition of two gas distribution companies, Jingneng and Luojiang, in Deyang City, Sichuan. The net profits of these two companies in 2015 were 35.35 million yuan and 7.32 million yuan respectively. In addition to the gas distribution business, the company is also actively expanding the upstream and downstream industries of natural gas. In 2015, the Yamei Energy IPO, which invested in Hong Kong stocks, pioneered the upstream exploration and development of natural gas, built a distributed energy project at the Shanghai Jiading IDC Center to explore the downstream natural gas market, and the company was fully transformed into a comprehensive natural gas service provider.
Distributed natural gas is an important expansion area for the company
The company is currently constructing the first distributed energy project to supply power and cooling for the new Aura Network's IDC center in Jiading, Shanghai. It is expected to be put into operation in early '17.
The stable load and high degree of compatibility between cooling and electricity at the IDC center make it one of the most suitable users for distributed energy. With the continuous development of the distributed field, the company will also explore different models of distributed projects in the future.
Profit forecasts
The company's net profit for 2016-18 is estimated to be 39 million, 87 million, 127 million, and the corresponding PE is 111/50/34 times. The company's market capitalization is small, the majority shareholders' shareholding ratio is high, and employee shareholding is tied to management interests, giving it a “highly recommended” rating.
Risk warning
Macroeconomic downturn, risk of gas distribution falling; project construction and commissioning progress falls short of expectations; distributed gas development falls short of expectations
