This report is read as follows:
The company released its three-quarter report in 2017, with a net profit of 8.72 million yuan in a single quarter, lower than expected. The main reason is that the cost of the newly expanded sales market is higher and the gross profit margin of LNG trade distribution business is low.
Main points of investment:
Downgrade to cautiously increase the rating and downgrade the profit forecast. Taking into account the high fees in the new market of LNG distribution business and the lower gross profit margin than expected, we downgrade the EPS of 2018 / 2019 to 0.44 / 0.87 / 1.54 (the previous value is 0.87 / 1.16 / 1.35 respectively). Give 2018 industry average PE35.6 times, downgrade target price to 30.97 yuan, downgrade to prudent overweight rating.
The company's lower-than-expected third-quarter results are mainly due to the high cost of expanding new markets for LNG business. In the third quarter, the company realized a net profit of 8.72 million yuan, down 47.3% from the same period last year. The company's lower-than-expected business in the third quarter was mainly due to the high cost of the company's newly expanded LNG distribution market, at the same time, the company's traditional supply of goods decreased, and the gross profit margin of the traditional freight business decreased. The company's overall gross profit margin fell to 5.6% from 9.6% in the same period last year. The proportion of company fees dropped from 4.8% to 2.8%.
Domestic LNG distribution business volume is growing steadily. The company completed LNG trade sales of 400000 tons in the first half of the year, and it is expected that the gas sales in 2017 will exceed 670000 tons of LNG sales in 2016. With the increase of LNG imports, LNG trade volume will also gradually increase. As the leader of LNG distribution trade business, the company has a high probability of business volume growth. The company is divided into four sales regions: North China, East China, South China and Southwest China; at the same time, in view of the growing demand for natural gas consumption in the industrial sector, the company focuses on the business layout of industrial direct supply gasification stations in Shandong Province. The company's profit margins will return to 2016 levels after the company's newly expanded market share is stable.
The growth rate of natural gas consumption is high, and the import of LNG will increase in the fourth quarter. From January to September 2017, natural gas consumption increased by 18% compared with the same period last year, and natural gas imports increased by 27%. The pressure of natural gas supply will increase in the fourth quarter, and the import of LNG will further increase.
Risk Tip: oil price falling risk, canceling cooperation risk with China Petroleum & Chemical Corp, safety accident risk.
