Event

The company issued a forecast of Q1 performance in 2019: the net profit of returning home is about 3800-39.6 million yuan, an increase of 555.65% and 583.25% over the same period last year; the impact of non-recurrent profit and loss on net profit is about 1.9 million yuan.

The main reasons for the substantial increase in the company's performance are as follows: in December 2018, the company completed the acquisition of the controlling stake in Zhongwobang for the first time in the first quarter, and currently controls 50.5% of the equity, with an actual shareholding of 37.17%. The new natural gas production and sales business in the company's main business has improved the company's sales and profit ability. (2018 acquisition process: ① paid cash for 27.20% of China Warburg through its 51% subsidiary, Wojin Energy, and completed the transfer in February 2018; ② acquired an additional 23.20% stake in China Haiwobang from its former shareholders, and completed the transfer in December 2018. )

The planned annual production capacity of Yonghe well in 18-30-45 is 2 billion square meters, and the growth rate of gas production in the block is expected to exceed 16% in 18-20 years.

Zhongwobang signed a 30-year product sharing contract with Petrochina Company Limited Coalbed methane Company in 2009 to jointly develop tight gas in Shilou West Block, covering an area of 1524 square kilometers. The proven well areas are: Yonghe 18, 30, 45, of which ① Yonghe 18 entered the commercial production stage in May 17, with a production capacity of 500 million square meters per year. ② Yonghe 45 well is in the development period, adjacent to Yonghe 18 well. At present, it has applied for joint development with Yonghe 18 well, with a planned production capacity of 1.2 billion square meters per year after the merger. The 800 million square development project of ③ Yonghe 30 well area has been filed by the National Energy Administration and is in the development stage. Benefiting from the commercial exploitation of well Yonghe 18, Zhongwa Bang sold 63 million square meters of gas in 17 years, an increase of 125% over the same period last year; revenue of 770 million yuan, an increase of 112% over the same period last year; and a net profit of 310 million yuan, an increase of 175% over the same period last year. When the Yonghe 30 and 45 wells enter the commercial production period, Zhongwa's gas production is expected to increase significantly again. It is expected that the growth rate of gas production in the block will be maintained at more than 16% in 18-20 years, with a net profit of about 363 million yuan.

Bullish on the development of China Haiwobang, the company plans to continue to issue additional acquisitions and cash acquisitions to achieve 67% absolute holding.

The company is optimistic about the future development of Zhonghaiwobang. In March 19, the company announced a restructuring plan: the company intends to issue shares to buy another 41% stake in Wojin Energy, a holding subsidiary, thereby indirectly buying an 11.15% stake in CSB; after this transaction, the company still controls a 50.5% stake in CSB. However, the proportion of interest in CSB will increase from 37.17% to 48.32%. In November 18, the company signed a "letter of intent" with the original shareholders of China Haiwobang. After 18 years of performance betting, the company will continue to acquire 16.50% of the shares in cash, thus controlling 67% of the shares and becoming its absolute controlling shareholder.

Profit forecast: we estimate that the company's 18-20-year net profit will be RMB 2868 million respectively. In addition, we give and prepare for the profit forecast: ① does not take into account the additional acquisition plan announced by the company in March 1919. After the consolidation of the 50.5% equity (the actual equity is 37.17%), the company's net profit for 19-20 years is 125 million yuan. ② considered the additional acquisition plan announced by the company in March 19. The actual equity of Zhongwobang was 50.5%. The net profit of the company in 19-20 was about 235 million yuan. After the completion of the 67% equity acquisition by ③, the company's net profit in 19-20 was 310 million yuan. 376 million yuan.

Risk hint: valuation risk of assets to be purchased, risk that transactions are suspended / cancelled, gas production is not up to expectations