I. Overview of events
Recently, we conducted a survey of Jinhong Energy and had an in-depth exchange with the company on the conversion of coal to gas in Beijing, Tianjin and Hebei.
II. Analysis and judgment
The semi-annual report is expected to increase by 30% to 50%, and there is a strong certainty of the reversal between gas sales and performance. The company forecasts that the net profit of 2017H is expected to be 170 million yuan, an increase of 30%, 50%, and a year-on-year increase of 30%, 50% and 138%, respectively. The supply-side reform has led to the recovery and rapid growth of gas consumption in the downstream gas industry, and the implementation of environmental protection policies such as "coal to gas" has also promoted the significant increase of regional gas consumption. The company's gas supply capacity is 3 billion square meters per year, and the utilization rate of production capacity is about 30%. The growth of gas sales will lead to a substantial increase in unit net profit.
The company's future gas growth mainly comes from the following aspects: in the short term, the State Reserve Liquefaction Plant resumed production in June this year, and is expected to sell 160 million to 180 million square meters of gas this year, and about 250 million square meters for the whole of 2018. Zhangjiakou has an important task of the Winter Olympic Games, and the task of "changing coal to gas" is arduous: there are about 3000 administrative villages in Zhangjiakou, with 200,300 households in each village. Based on 3000 yuan per household connection fee and 1400 square meters per household gas consumption per year, the market space of Zhangjiakou coal to gas connection fee is 18-2.7 billion yuan, and the gas consumption can reach 840-1.26 billion square meters. The Shahe project is expected to be ventilated this year. The long-term demand is about 300-500 million square meters. The long-term volume of 100 million square meters of Hengyang Shuikoushan national non-ferrous metal base is expected to start supplying gas next year.
The conversion of coal to gas in Beijing, Tianjin and Hebei is unprecedented, and Hebei natural gas consumption will enter a period of explosive growth. Policies such as the "enhanced measures for the Prevention and Control of Air pollution in Beijing-Tianjin-Hebei (2016-2017)" and the "work Plan for the Prevention and Control of Air pollution in Beijing-Tianjin-Hebei and its surrounding areas in 2017" have been issued successively. Coal is banned and coal is restricted in Beijing-Tianjin-Hebei and surrounding urban areas. It is required to comprehensively promote clean heating in winter and complete zero clearance of small coal-fired boilers by the end of October 2017. On the basis of the subsidies provided by the central government according to the city level, local governments have also issued unprecedented subsidy policies to promote the work of "changing coal to gas". For example, Hebei Province has a subsidy of 3000,000 yuan per household connection fee for rural heating and 1 yuan per square meter for three years. With the vigorous promotion of the policy, it is expected that Hebei's natural gas consumption will enter a period of explosive growth, and it is estimated that Hebei's natural gas consumption will reach 30 billion square meters by 2020.
It is proposed to change its name to Jinhong Holdings, which highlights the strategic pattern of the company to build a new energy platform for environmental protection. In recent years, through mergers and acquisitions, the company has begun to set foot in the environmental protection engineering industry, and has made a layout in the upstream of natural gas, new energy development, new energy storage technology and so on. Renaming Jinhong Holdings highlights the company's strategic pattern of building a comprehensive clean energy platform company with the whole natural gas industry chain, environmental protection and clean new energy.
Third, profit forecast and investment advice: the EPS of the company from 2017 to 2019 is expected to be 0.67,0.91,1.16 yuan respectively. Corresponding to PE 26 times, 19 times, 15 times, the company's performance reversal certainty is strong, extension expansion is expected to be strong, maintain the "highly recommended" rating.
Fourth, risk hints: gas sales and engineering installation revenue are lower than expected.