Main points of investment
The company is mainly engaged in urban gas business in Kashgar City, Shufu County and Shule County, Xinjiang. The main income comes from natural gas sales and household installation business. At present, the operating area of the company's urban gas business includes "one city and two counties", that is, Kashgar City, Shufu County and Shule County.
The steady growth of natural gas market demand will promote the country's green development. 1) the urbanization rate in Kashgar is less than 23%, and there is more room for gas population growth. At the end of 2016, the total population of Kashgar was 4.5147 million, of which the urban population was only 1.0224 million, accounting for only 22.60% of the total population. At present, the company's user coverage in the "one city, two counties" area in Kashgar is very high, but it is only concentrated in urban areas, while the heat sources of life in the vast non-urban areas are mainly firewood and liquefied petroleum gas. With the establishment of the Kashgar Special Economic Zone and the acceleration of urbanization in the region, the non-urban population in the region has provided enough space for the company's business development. 2) the scale of natural gas use is constantly expanding to promote the green development of the country. By the end of 2016, China's natural gas production was 138.4 billion cubic meters and consumption was 210.3 billion cubic meters. From 2006 to 2016, China's natural gas production grew at a compound annual rate of 8.61%, while consumption grew at an annual compound rate of 13.50%.
3) China has issued a series of policies to encourage the development of clean energy, focusing on optimizing the energy structure and taking the development of clean and low-carbon energy as the main direction of adjusting the energy structure. We will continue to develop both the efficient and clean utilization of non-fossil energy and fossil energy, gradually reduce the proportion of coal consumption and increase the proportion of natural gas consumption. By 2020, non-fossil energy will account for 15% of primary energy consumption, natural gas will account for more than 10%, and coal consumption will be controlled within 62%. There will be strong policy support.
The development of major product sales and service business is optimistic. With the acceleration of urbanization and commercialization in Kashgar, the number of residential and commercial users managed by the company is increasing year by year, from more than 130000 at the end of 2014 to more than 170000 at the end of June 2017. In addition to residential gas sales prices have been stable, the company's commercial gas, industrial gas, CNG gas prices rose.
In 2016, the company's installation business revenue increased by 38.72% over 2015, mainly due to the company's recognized income from the completion of the infrastructure renovation project in the core area of the old city of Kashgar in 2016.
Profit forecast and valuation. From 2017 to 2019, the EPS is expected to be 0.74,0.80,0.86 yuan respectively; the company's performance growth is relatively high, giving 2018 25m 35 times valuation (Shenwan gas plate is currently valued at around 40 times TTM), and the corresponding share price is 20,028 yuan.
Risk tips: natural gas sales may be lower than expected, installation business decline or higher than expected.