Main points of investment:
The largest gas company in Guizhou Province
The company is the largest gas enterprise in Guizhou Province, mainly engaged in urban gas operation business, specifically for the construction, operation, service and safety management of Guizhou natural gas branch pipeline, urban gas transmission and distribution system, liquefied natural gas receiving and reserve supply station, filling station and related facilities, as well as the corresponding engineering design, construction and maintenance. The company has obtained the pipeline gas franchise in 25 specific areas in Guizhou Province, including Guiyang City, Liupanshui City, Zunyi City and 1 specific area outside the province. The company has built three natural gas branch pipelines in the province, with a total length of about 260 kilometers.
Fund-raising projects to improve profitability
The project raised by the company is the reconstruction and expansion project of urban gas pipeline in Guiyang City. The construction period of the urban gas pipeline reconstruction and expansion project in Guiyang City is three years. It is planned to increase annual sales revenue by 41.52 million yuan in the first year, 174.53 million yuan in the second year and 355.77 million yuan in the third year. After the project reaches production, it is estimated that the annual sales income will increase by 671.27 million yuan, and the after-tax internal rate of return will be 22.34%, which can significantly improve the company's profit level.
Profit forecast
According to the construction progress of the fund-raising project, we estimate that the net profits attributed to the parent company in 2017 and 2018 will be 133 million yuan and 143 million yuan respectively, with year-on-year growth rates of 33.75% and 7.17% respectively, and corresponding diluted earnings per share of 0.16 yuan and 0.18 yuan.
Pricing conclusion
Before this issue, the total share capital of the company was 691040909 shares, and this time it is proposed to issue no more than 121948396 RMB common shares, accounting for 15.00% of the total share capital of the company after the issue. The issuing price of the company is 2.21 yuan per share. Taking into account the valuation of comparable companies in the same industry and the growth of the company, we think that the reasonable valuation of the company is 6.55-8.19 yuan, corresponding to the price-to-earnings ratio of 40-50 times earnings per share in 2017.
