We believe that the bottoming out of Houpu's traditional business will usher in marginal improvement, its EPC business is actively landing, and the company's performance inflection point is approaching.
The traditional main business has hit bottom, and with the increase of natural gas heavy truck permeability, it will usher in marginal improvement. Houpu's traditional main business is complete sets of equipment at LNG and CNG gas stations (the two businesses accounted for nearly 70 per cent of revenue in 2016). With the intensification of competition in the industry, the gross profit margin of the traditional main business fell, and net profit fell 27 per cent in the first three quarters of 2017 compared with the same period a year earlier. It is expected that with the gradual increase in the permeability of natural gas heavy trucks, the business of LNG and CNG filling stations will gradually usher in marginal improvement.
The new main business EPC business is actively landing, and the company's performance inflection point is coming. ① Houpu EPC business mainly starts in two aspects: natural gas comprehensive utilization project and natural gas distributed project. The company has strong competitiveness in these two aspects. ② has the core competitiveness to conduct business. HTC's relatively complete design qualification and the equipment manufacturing and integration capabilities that the company has accumulated for a long time in the natural gas industry provide the company with the core competitiveness of developing its new main EPC business. The ③ project is abundant and the market prospect is broad. Sichuan-Chongqing region has sufficient natural gas reserves, sufficient natural gas-related projects, huge market space, and broad prospects for the company. ④ local government revenue will actively promote the landing of the project. With reference to the model of the Yongchuan project, the comprehensive utilization of natural gas has realized "Sichuan gas use", forming a natural gas industry cluster in the local area, which plays a great leading role in the local economy, and the local government will actively promote the landing of the project. ⑤ Yongchuan project is about to land, the company's performance inflection point is coming. The company said in its 2017 three-quarter report that the Yongchuan project is being actively promoted, and the two sides have agreed to sign an investment agreement before the end of November 2017. It is expected that with the project about to land, the company's performance inflection point will come.
Investment suggestion: the company's operating income from 2017 to 2019 is expected to be 1313.7 million, 2134.8 million and 2729.2 million, and the return net profit is 141,248.8 and 310.11 million, the corresponding EPS is 0.38,0.67,0.84 yuan, and the corresponding PE is 38,22,17.5. Recommend rating.
Risk tip: the landing of the EPC project is not as expected.