Main points of investment:
Natural gas ushered in the peak consumption season, long-term demand is promising. From January to August 2017, China produced 97.77 billion cubic meters of natural gas, an increase of 9.2 percent over the same period last year, and imported 42.46 million tons of natural gas, an increase of 25.5 percent over the same period last year. With the start of heating in northern China in winter, the conversion of coal to gas downstream by environmental protection, and the sharp rise in the price of LPG this year, the demand for natural gas is expected to continue to grow rapidly. In the long run, according to Shell's 2017 LNG outlook, annual global natural gas demand growth between 2015 and 2030 is 4-5 per cent; China's share of global LNG demand will grow from 4 per cent in 2015 to 16 per cent in 2030.
The company is a LNG trade and logistics integrated distributor, business is expected to usher in rapid development. The company is a scarce target in LNG and even dangerous chemicals logistics, and the proportion of LNG business in revenue has gradually increased in recent years (81% in 2016).
By cooperating with China Petroleum & Chemical Corp, the company can obtain a stable supply of large-scale LNG and provide a guarantee for trade volume. In addition, the company can obtain a stable middleman income, which is helpful to avoid the risk of LNG price fluctuations. We believe that the company is expected to benefit from the rapid development of the LNG industry, mainly due to 1, lack of regional pipe network, LNG cargo transport volume growth; 2, overseas spot price advantage, LNG transport magnified by increased import volume; 3, good regional layout, stable distribution in Shandong area, expansion of Guangxi, future layout of Tianjin area, good growth.
LNG trade distribution continues to expand, leading to a substantial increase in revenue. The company's 2017H1 operating income is 1.55 billion (YoY+75.44%), and its net profit is 30 million yuan (YoY+7.15%). The revenue growth mainly comes from the substantial increase in the income of the main LNG trade business. The sales of 17H1LNG trade form is about 400000 tons, and the realized income is about 1.2 billion yuan, an increase of about 93% and 101% respectively over the same period last year. However, due to the expansion of new markets, the gross profit margin of the business fell to about 4% from the level of about 6% in the same period last year, causing the company's overall gross profit margin to fall by 3.2 percentage points and slowing the company's performance growth.
There will be an increase in September to ensure the future development of the company. According to the announcement of the company on March 24, 2017, the company plans to raise 458 million yuan in non-public offerings, of which 321 million yuan is used for LNG logistics projects, 55.16 million yuan for information upgrading projects, and 82.46 million yuan for supplementary working capital. The fixed increase plan has been held on September 12, providing a guarantee for future development.
The profit forecast remains unchanged and maintains to the "overweight" rating: the company is the scarce target in LNG and even dangerous chemicals logistics. At present, the company's LNG trade logistics business is developing steadily. By giving full play to its advantages in the field of logistics, it is expected to become the leading enterprise in the LNG logistics distribution industry in the future. Considering that the demand for natural gas is expected to improve in the long run, the company will benefit from the current peak season and is optimistic about the company's long-term development. We maintain the company's earnings per share forecast for 2017-2019 is 0.63 yuan, 0.90 yuan and 1.11 yuan respectively, corresponding to the 17-19 PE is 45X, 31x and 25x respectively, maintaining the "overweight" rating.
