Event: on April 14, 2020, the company announced its 2019 results KuaiBao and 2020 Q1 performance forecast. In 2019, the company realized operating income of 1.887 billion yuan,-19.13% of the same period last year, and net profit of 557 million yuan,-17.86% of the same period last year. In Q1 in 2020, the company made a profit of 92 million-112 million yuan, down 10.88% from the same period last year. In this regard, our comments are as follows:
Q1 performance in 20 years was slightly higher than expected, while the decline in earnings in 19 years was affected by demand and subsidy policies. According to the announcement, Q1 Company overcame the impact of the COVID-19 epidemic in the past 20 years, and its sales and revenue both increased by more than 10% compared with the same period last year, but the decline in net profit from home was mainly due to unrecognized subsidy income (confirmed at 0.3 yuan per party in the same period last year). Other income dominated by subsidies was 70 million yuan, while some gas control operations stopped. The decline in performance in the past 19 years is mainly affected by the decline in demand for gas well construction and changes in government subsidy policies. (the supplementary notice of the interim measures for the Administration of Special funds for Renewable Energy Development of the Ministry of Finance has changed the mode of quota subsidy for the development and utilization of coalbed methane.
The mining of new blocks will be carried out in an orderly manner. On March 22, the company announced the progress of exploration and trial mining in Liulin Shixi and Wuxiang south blocks. Up to now, 85 wells have been drilled and 48 have been fractured in Liulin Shixi block, with an average daily gas production of about 65,000 cubic meters and a maximum of 80,000 cubic meters, while in southern Wuxiang block, 56 wells have been drilled, 16 have been fractured, 11 have been trial run, and 7 ports have been put into operation with a daily output of nearly 8000 square meters, and the construction of gathering pipelines and compression stations in the block has been basically completed.
Investment advice: maintain a "prudent overweight" rating. In the context of the policy of "gasifying Shanxi", the company is expected to expand production and sales through the promotion of new block mining. We estimate that the company's homing net profit from 2019 to 2021 will be 557, 724, 906 million, a year-on-year growth rate of-18.0%, 3.0%, 25.2%, corresponding to the April 14 PE valuation of 15.0,11.5,9.2 times. Maintain the "prudent overweight" rating.
Risk hint: major changes in government preferential policies, accounts receivable payback risk, downstream demand sharp decline risk.