Main points of investment:
Event: the company announced on the evening of November 7, 2017 that the company signed a letter of intent for Cooperation in establishing an Industrial Investment Fund with China Natural Gas Group Co., Ltd. and China Nuclear Industry Fifth Construction Co., Ltd. on November 7, 2017 in Shanghai. The proposed industrial investment fund: Hong Kong Popularization Nuclear Clean Energy Industry Investment Partnership, the industrial investment fund is mainly invested in liquefied natural gas related businesses / projects. The total capital investment of the industrial investment fund is 5.01 billion yuan.
The establishment of an industrial fund shows the company's resource endowment, and there is great room for imagination in tripartite cooperation. The company signed a cooperation agreement with CNG and CNNC to set up an industrial fund, which is the company's third strategic cooperation agreement in nearly 3 months. The industrial fund is mainly invested in liquefied natural gas projects, including natural gas liquefied natural gas plants, automotive liquefied natural gas industry chain, marine liquefied natural gas industry chain, LNG receiving station and so on. Among the three major partners, China Natural Gas is an energy operation company, CNNC No. 5 is an energy engineering construction company, and Houpu is a supplier of energy technology and energy equipment. Tripartite cooperation will form an industrial chain alliance of "engineering design" + "equipment manufacturing" + "project construction" + "energy operation". According to the announcement of September 25, CNG signed a strategic investment agreement with Jiangyin City to build LNG receiving station, LNG tanker logistics base, LNG filling station and LNG distributed energy in Jiangyin Yangtze River Port area. We judge that China's natural gas on-hand project planning will be introduced into the tripartite industry alliance, which is expected to bring a large amount of equipment manufacturing and equipment sales business to Houpu.
The energy project continues to advance, and the project will speed up its landing. From January to September 2017, China's natural gas consumption was 1677 billion square meters, an increase of 18.4% over the same period last year. We believe that the growth of natural gas consumption will drive the construction of supporting projects in the industrial chain. According to the company announcement and related disclosure, the company signed a total of about 720 million from December 2016 to July 2017, and the overall progress of the project is good. On August 28, the company announced that it signed a cooperation agreement with the government of Yongchuan District of Chongqing Municipality on the comprehensive utilization of shale gas with an investment of 4 billion yuan, and the company has recently been focusing on promoting this major project. We expect the company to make further substantial progress on the Yongchuan District project in the fourth quarter, and the project landing will greatly increase the company's performance and promote the high performance growth of the company from 2018 to 2019.
There is a great demand for the construction of natural gas industry chain in Sichuan and Chongqing, and the company's new order can be expected. The Ministry of Land and Resources said in September that it would establish shale gas exploration and distribution bases in the Yangtze River Economic Belt, including Chongqing, Sichuan, Guizhou and other Yangtze River basins. The company has long carried out business in Chongqing, Sichuan and other areas, with rich industrial resources. According to related news, Tongliang District of Chongqing plans to cooperate with Houpu in the construction of natural gas industry chain, and Sichuan plans to build nearly 10 billion natural gas distributed energy projects. We believe that the above projects are potential expansion businesses of the company and are expected to drive the growth of the company's energy engineering business.
Profit forecast and investment rating: the company's traditional gas filling station business and clean energy project layout will benefit from the increase in natural gas consumption. Considering the project landing in Yongchuan District, the company's net profit from 2017 to 2019 is expected to be 162 million yuan, 352 million yuan and 443 million yuan respectively, and the EPS is 0.44,0.95 and 1.19 yuan respectively, corresponding to 37.7X/17.4X/13.8X corresponding to PE, maintaining the "highly recommended" rating.
Risk hint: the confirmed revenue of the energy project is lower than expected, and the order of the gas station is lower than expected.