Items:
The company released its annual report in 2019, with revenue of 4.88 billion yuan in 2019, an increase of 2.7% over the same period last year, and a net profit of 730 million yuan, down 27.6% from the same period last year. The dividend per share is 0.425 yuan (including tax).
According to the company's quarterly report for 2020, 2020Q1 revenue fell 23.2% year-on-year to 1.51 billion yuan, while net profit fell 40.7% year-on-year to 190 million yuan.
Comments:
The gas is connected to the pressure. The company's gas sales revenue in 2019 was 3.21 billion yuan, an increase of 33.4% over the same period last year, accounting for more than 65% of total revenue, and the corresponding gas sales increased by 28.7% to 1.25 billion square meters. However, due to the 2019-2020 heating season upstream price increases superimposed on some areas to adopt the "first payment before gas" policy, the company's gas business costs still maintain greater pressure. In terms of connection, affected by the near end of the conversion of rural coal to gas and the slower-than-expected progress of urban expansion, 260000 newly developed residential users were newly developed throughout the year. Although the part of rural coal to gas with low profitability in the connection structure decreased somewhat, the overall gross profit margin of the gas business was still affected by the increase in upstream prices, which significantly reduced 5.0pct to 26.4% compared with the same period last year. In addition, due to the reduction of tax-free income from coal to gas in rural areas in 2019, the cost of corporate income tax increased significantly by 33% to 220 million yuan compared with the same period last year.
The epidemic situation has a negative impact on the connection. 2020Q1 was further pressured by business contributions such as connectivity under the impact of the epidemic. The company's 2020Q1 revenue declined significantly, while the decrease in connection share led to a decline in comprehensive gross profit margin (2.5pct) to 22.5% compared with the same period last year.
Steady progress will be made in the expansion of different places. The overall scale of the company's Fuyang and Jingzhou projects is still in line with expectations, of which the natural gas business revenue in Hubei increased by 7.9% to 490 million yuan, the gross profit margin decreased by 3.1pct to 23.6%, and the Jingzhou natural gas net profit reached 100 million yuan, up 8% from the same period last year. Affected by the consolidation time, the income in Anhui is + 157% to 920 million yuan, the net profit of Fuyang Gas is 160 million yuan, and the scale of different places as a whole has maintained a steady development. In addition, the company acquired Zhuolu and Suizhong in October 2019, further consolidating the company's foundation in the Beijing-Tianjin-Hebei region.
The payback optimization increases the cash flow and the dividend rate increases greatly. In 2019, the company further strengthened the management of accounts receivable for coal to gas and other business, and the balance and turnover days of accounts receivable at the end of 2019 were optimized by 29% for 10 days to 920 million yuan / 82 days, respectively. Operating net cash flow rose 17 per cent year-on-year to 1.43 billion yuan, and the dividend rate corresponding to cash dividends rose sharply to 82 per cent.
Profit forecast, valuation and investment rating. Taking into account the impact of the epidemic on the connection business and the pressure on costs caused by sharp price increases in the upstream peak season, we downgrade the company's profit forecast and expect the company to achieve a net profit of 7.50 yuan and 840 million yuan (the previous value is 12.6 yuan and 1.33 billion yuan) from 2020 to 2021. the corresponding valuation is 8 and 7 times, taking into account the current company and cash flow and dividends still maintain a high level, maintain a "strong push" rating.
Risk hint: the growth of gas sales is not as expected, the upstream price policy has changed significantly, the progress of the connection project is not as expected, and the upstream gas money return is not as expected.
