Summary of the event: the company issued an announcement and received a notice from the controlling shareholder Xineng International and the actual controller Chen Yihe, planning to increase its holdings through the secondary market within 6 months. After the increase, the proportion of shares shall not exceed 30%, the price of the increase shall be less than 25 yuan, and the total amount of the increase shall not exceed 300 million yuan.
II. Analysis and judgment
Increased holdings show the confidence of major shareholders, 2017 half-yearly reported net profit increased by 30%, gas sales upward inflection point. Major shareholders promise not to reduce their holdings during the period of increase, and the large increase of up to 300 million demonstrates the confidence of major shareholders and actual controllers in the long-term development of the company. The company previously released its 2017 semi-annual report, with revenue of 1.637 billion yuan up 47% over the same period last year, net profit of 173 million yuan up 31%, and non-net profit of 121 million yuan decreased by 7.56% over the same period last year. In the first half of the year, the company sold 587 million square meters of gas, an increase of 64% compared with the same period last year. LNG sales increased by 245.93% year-on-year, and industrial user gas sales increased by 102.90% over the same period last year.
Business layout throughout 10 provinces, will continue to benefit from the "coal to gas" process. According to the company's 2017 semi-annual report, the company has business in 10 provinces, including Hunan, Hebei, Shandong and Shanxi, and is one of the gas companies with the widest distribution of A-share gas business; among them, Hebei, Shandong and other Beijing-Tianjin-Hebei regions where the promotion of "coal to gas" is relatively strong, the company accounts for a large proportion of revenue, and the company will benefit from the promotion of nationwide "coal to gas" work for a long time. The short-term growth of the company's gas volume mainly comes from the following aspects: 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 coal to gas: there are about 3000 administrative villages in Zhangjiakou, with 200 million households in each village. According to 3000 yuan / household connection fee and 1400 square meters / household gas consumption per year, the market space of Zhangjiakou coal to gas connection fee is 1.827 billion yuan, and the gas consumption can reach 841.26 billion square meters. The Shahe project is expected to be ventilated this year. The long-term demand is about 350 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 in Beijing-Tianjin-Hebei and surrounding "2y26" 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.
Third, profit forecast and investment suggestions: the company's EPS from 2017 to 2019 is expected to be 0.67,0.91,1.16 yuan. Corresponding to PE 25, 19, 15 times, the company significantly continued to benefit from China's coal gas conversion process, maintaining the "highly recommended" rating.
Fourth, risk hints: gas sales and engineering installation revenue are lower than expected.