The gas supplier in Foshan has a solid foundation. The company is Foshan City Fuel Company. The actual controller is the Foshan State-owned Assets Administration Commission. Annual gas sales revenue accounts for more than 90% of total revenue, and has exclusive franchise rights to uniformly receive all pipeline natural gas entering the Foshan geographical area. It has gas supply concessions for 4 of the 5 urban districts in Foshan; it has exclusive pipeline gas franchise rights outside of Foshan in Enping City, Nanxiong City, Gaoyao District of Zhaoqing City, and the Foshan (Yunfu) Industrial Transfer Industrial Park planning area. In 2017, revenue was 4.29 billion yuan (+13.9%), achieving net profit of 350 million yuan (+3%), 2018 Q1 revenue of 1.12 billion yuan, up 19.25% year on year. Net profit from the mother mother was 8255 million yuan, up 47.1% year on year. Good.
The economic base of Foshan is good, the industry is well developed, and there is plenty of room for gas consumption. In 2017, the gross domestic product of Foshan reached 954.96 billion yuan, an increase of 8.5% over the previous year. The per capita gross domestic product reached 115,600 yuan, and the gross industrial product was about 2.24 trillion yuan, continuing to rank among the largest and medium-sized cities in the country. The higher level of economic development and residents' income levels have led to strong energy demand in Foshan. At the same time, the secondary sector in Foshan accounts for around 60% of the national economy, forming an industrial cluster with regional advantages such as home appliances, ceramics, aluminum profiles, furniture, etc., and is also the largest comprehensive ceramic production base and export base for building ceramics products in China, and the industry is well developed. Ceramics, aluminum profiles, hardware, etc. are all energy-intensive industries. Currently, natural gas is gradually being used and promoted to replace non-clean energy such as coal, heavy oil, water and gas, etc., which is expected to further increase the demand for gas consumption. According to the “Foshan Medium- and Long-Term Energy Plan (2010-2020)”, the city's total natural gas consumption target in 2020 is 3 billion cubic meters. Compared with the natural gas consumption of about 1.4 billion square meters in 2017, there is a lot of room for natural gas consumption.
Driven by the energy restructuring policy, the company's gas sales have continued to increase, and profitability is stable. Benefiting from a well-developed industrial base in the region where it operates, the company's industrial customers maintain a high proportion of natural gas consumption.
If natural gas distribution customers are excluded from the company's customers, the company's industrial customers account for a stable share of natural gas consumption at around 86%, while industrial and commercial customers account for a stable share of more than 90% of the total natural gas consumption. At the same time, the gas supply and stable operation in Foshan jointly drove the company's gas sales volume of 10.8, 1.16 and 1.39 billion square meters in 2015-2017, respectively, up 14.07%, 7.88% and 19.69% year on year, showing an accelerated growth trend. In addition, the company complied with policy and cost changes, and gas sales prices continued to drop, but the spread ratio was stable, driving stable profitability
Profit forecasts and investment advice. The 2018-2020 EPS is expected to be 0.76, 0.92, and 1.09 yuan respectively, corresponding to PE 28, 24, and 20 times. The company's performance is steady and continues to grow. Covered for the first time, giving it an “increase in holdings” rating.
Risk warning: The risk of customer expansion falling short of expectations, and a sharp reduction in price spreads brings the risk of a decline in profit margins.
