The output of the company's main pipe products still has room to increase in the later stage.
The company is one of the most complete pipeline manufacturers for oil and gas transportation in China. According to the different application fields, the welded steel pipes for oil and gas transportation include spiral seam submerged arc welded pipe, straight seam submerged arc welded pipe and straight seam high frequency resistance welded pipe; PE gas pipe and galvanized pipe are widely used in urban gas low pressure courtyard pipe network and household pipeline; steel-plastic composite pipe and stainless steel composite pipe are used in oil and gas gathering and construction water supply and drainage. The company's production line includes an annual output of 200000 tons of spiral welded pipe project and an annual output of 100000 tons of steel-plastic composite pipe project.
It is expected that after the production line is put into production, production capacity is expected to increase significantly.
Benefit from the warming of oil and gas investment and the annual performance of underground pipeline construction may reach an all-time high 40, 000 km of new natural gas pipelines will be built during the 13th five-year Plan period. Based on the total length of 74000 km in 2017, an average of 10 000 km will need to be built in 2017-2020, while an average of 5000 km will be built in 2015-2017. Therefore, theoretically, the average annual investment in pipeline construction from 2017 to 2020 should be twice the average level of the previous two years. According to the 13th five-year Plan of Petroleum, by 2020, the mileage of China's crude oil pipeline will reach 32000 km from 27000 km in 2015, with an average annual growth rate of 3.46%. Therefore, there will be a huge demand for pipe network projects and steel pipes and plates in China in the future. In addition, many provinces and cities have taken the initiative to introduce relevant plans, and the construction of underground comprehensive pipe corridors is accelerating. The promotion of urban underground comprehensive pipe corridor construction project is conducive to the development of gas pipeline and water supply and drainage pipeline industry.
Benefiting from the warming of oil and gas investment and the construction of underground pipe corridors, the company's products may be in continuous demand in the later stage. As of the third quarter, the company achieved a net profit of 161 million yuan, an increase of 46.90% over the same period last year. The demand for the company's products is good, and the annual performance may reach a record high.
Profit forecast
We estimate that the company's revenue from 2019 to 2021 is 5 billion yuan, 5.25 billion yuan and 5.565 billion yuan respectively, the EPS is 0.42 yuan per share, 0.45 yuan per share and 0.5 yuan per share, respectively, and the corresponding PE is 16.70X, 15.65X and 14.07X respectively. Since 2010, the average PE_TTM of the company's history has been 44.83X, with a median of 33.30X and a quartile of 27.00X. The current PE_TTM of the company is only 16.14X, which is at a low level in history. By comparing with Changbao shares and Jiuli specialties of the target company, and combined with the company's performance in the first three quarters, we think that the company's target PE for the next six months is 19X, corresponding to a target price of 8.04yuan, giving the company an "overweight" rating.
Risk hints: the decline in oil and gas investment leads to the weakening of product demand, the lower-than-expected production schedule of the production line and the company's own operating risks.