Main points of investment
The company released the annual report for 2017 and the quarterly report for 2018: the net profit of returning to the mother in 2017 was 395 million yuan, down 22.24% from the same period last year; the net profit of non-return was 390 million yuan, down 22.65% from the same period last year. In the first quarter of 2018, the net profit of returning to the mother was 314 million yuan, an increase of 42.60% over the same period last year, and the net profit of deducting non-return was 313 million yuan, an increase of 42.79% over the same period last year.
The growth of gas sales in 2017 led to revenue, and the reduction of pipe export price pulled down the gross profit. 1) the long-distance pipeline business is the company's core business, contributing more than 90% of revenue / gross profit. In 2017, business income reached 6.938 billion yuan, an increase of 5.07% over the same period last year, driven by the growth of sales volume. The sales volume was 5.284 billion square meters, an increase of 6.81% over the same period last year. The gross profit was 669 million yuan, down 14.93% from the same period last year, mainly due to the reduction in pipe export price. 2) the revenue of the city gas business reached 705 million yuan, an increase of 16.03% over the same period last year. The gross profit was 65 million yuan, an increase of 14.80% over the same period last year.
Gross profit margin rose sharply in the first quarter, with a large seasonal factor. The operating income in the first quarter was 2.897 billion yuan, an increase of 8.84 percent over the same period last year. The gross profit was 460 million yuan, an increase of 33.40% over the same period last year, and the gross profit margin increased by 15.88% over the same period last year. We believe that the gross profit promotion is driven by the promotion of gross profit of the parent company. The parent company contributed a gross profit of 427 million yuan, an increase of 35.53% over the same period last year; the gross profit margin was 18.23%, an increase of 4.17pct over the same period last year, mainly because the increase in sales unit price was greater than that in unit cost.
The commitment to inject assets into the group was postponed to April 2020. The Group undertakes to transfer its entire stake in Weinan Natural Gas to Shaanxi Natural Gas by April 10, 2018. However, according to the latest announcement in March this year, the transfer before the guidance on "separation of transportation and marketing" is not clear is not conducive to the overall planning of the company, so the equity transfer work has been postponed to before April 10, 2020.
Provincial pipe network operators, the new pipe network may further enhance the gas transmission capacity. The company has built 33 gas pipelines such as Jingxi first, second and third lines, with a gas transmission capacity of 135 billion square meters. All the newly built pipelines are connected to the existing pipe network, which can further expand the downstream market, and the total gas transmission capacity can be increased to 14.5 billion square meters.
Investment suggestion: "Gasification Shaanxi" promotes the growth of natural gas sales and maintains a prudent overweight rating. As the only pipe network operator in the province, the company benefits from the growth of natural gas consumption. After the new pipe network is put into operation, the downstream distribution market will be further expanded to ensure the steady growth of natural gas sales. We forecast that the net profit of the company from 2018 to 2020 is 5.04,5.55 and 607 million yuan respectively, corresponding to EPS 0.45,0.50,0.55, and the closing price PE on April 20 is 15.9,14.4,13.2 times respectively.
Risk hint: pipe transport price is further reduced; gas supply is insufficient.
