Main points of investment
Transform from traditional logistics company to distributor. Hengtong Logistics Co., Ltd. was founded in 2001, at the beginning of its establishment, mainly engaged in cargo transportation, logistics services, warehousing tally, car repair, etc., began to engage in LNG business in 2011, after several years of development, the company has become one of the most important LNG distributors in China, covering North, East, South and Southwest China.
Natural gas is a clean energy and has a good long-term demand prospect. LNG is liquid natural gas. The upper reaches of the industrial chain are mainly coastal LNG import receiving stations, while the downstream are mainly LNG filling stations, gas companies and factories. The demand for environmental protection, the growth of LNG car ownership and the support of policies such as "coal to gas" work together to accelerate the growth of natural gas consumption, while self-produced natural gas and pipeline imported natural gas are constrained by production capacity, which can not provide large supply increment in the short term. LNG sea import transportation is more flexible, which will be an important source of incremental contribution to natural gas in the next few years.
With China Petroleum & Chemical Corp, the company is expected to enter a period of rapid growth. The company's LNG distribution business is mainly operated by Huaheng Energy, a holding subsidiary (China Petroleum & Chemical Corp has a 27% stake), and China Petroleum & Chemical Corp is an important upstream gas supplier of the company. Supply side: China Petroleum & Chemical Corp's receiving station has put into production capacity of 6 million tons in 2018 and is expected to increase by 14 million tons in 2017-2020. Relying on China Petroleum & Chemical Corp receiving stations in Qingdao, Tianjin and Beihai, the company is also actively cooperating with Petrochina Company Limited, CNOOC and domestic LNG plants to ensure upstream supply. Demand side: the stricter national environmental protection requirements, the continuous promotion of "coal to gas" in the northern region, and the orderly implementation of the 13th five-year Plan will form a strong support for the future consumption demand of natural gas. With the development of both the supply side and demand side of LNG, the company is expected to enter a period of rapid growth.
Profit forecast and investment advice. LNG demand prospect is good, the company is one of China Petroleum & Chemical Corp's main LNG distributors, relying on China Petroleum & Chemical Corp to obtain relatively stable gas supply and sales revenue, 2018-2020 is expected to enter a period of rapid growth. It is estimated that the company's net profit from 2018 to 2020 will be 1.1,1.4 and 190 million yuan, equivalent to 0.54,0.69,0.95 yuan (EPS). On July 24, 2018, the company's share price will correspond to 23,18,13 times the PE of 2018-2020, giving the company a "prudent overweight" rating for the first time.
