Event: the company released its 19-year performance KuaiBao, with expected revenue of 1.887 billion yuan, a decrease of 19.13% over the same period last year, and a net profit of 557 million yuan, a decrease of 17.86% over the same period last year; the weighted average ROE decreased by 5.83pct to 13.56% compared with the same period last year; and issued a forecast of 20Q1 performance, which is expected to achieve a net profit of 0.92-112 million yuan, a decrease of 26.79%, 10.88% and a basic EPS of 0.10-0.12 yuan per share.
In 2019, coalbed methane sales increased steadily, and 20Q1 gas sales increased by more than 10%. In 2019, the company's coalbed methane sales volume, sales revenue and profits increased steadily, but the operating income and return net profit decreased compared with the same period last year, mainly as follows: first, due to the decline in demand for gas well construction business, engineering business volume and revenue decreased compared with the same period last year; second, the financial subsidy policy for coalbed methane has changed, and the company recognizes income according to the principle of prudence. 20Q1 coalbed methane sales volume and sales revenue increased by more than 10% compared with the same period last year, but the return net profit decreased compared with the same period last year, mainly due to: first, the standard of central financial subsidy for coalbed methane exploitation and utilization has not yet been determined, and the company did not recognize the subsidy as the current income in the first quarter (confirmed at 0.3 yuan per cubic meter in the same period last year); second, part of the coal mine gas control service business stopped.
The financial subsidy of coalbed methane has changed from the quota to the total adjustment, and the actual subsidy enjoyed by the company remains to be confirmed. In June 1919, the Ministry of Finance issued a supplementary notice on the interim measures for the Administration of Special funds for Renewable Energy Development, pointing out that the special funds for renewable energy development support the exploitation and utilization of unconventional natural gas such as coalbed methane. From 2019, subsidies will no longer be provided according to the quota standard. According to the principle of "more compensation" and "winter supplement", cascade capital subsidies are carried out according to the actual mining utilization and distribution coefficient. The actual compensation funds received by the company will be affected by the total amount of unconventional natural gas compensation funds in that year, the national and local total amount of unconventional natural gas exploitation and utilization included in the scope of compensation and compensation, as the total amount of compensation funds this year and the exploitation and utilization of coalbed methane as the basis for bonus and compensation calculation have not been announced so far, it is difficult to determine the increment and distribution coefficient involved in the new policy. The amount of subsidies actually enjoyed by the company this year needs to be further confirmed. At present, in accordance with the principle of prudence, the company recognizes the financial subsidies actually received as other income, which has an impact on performance.
The new gas source is progressing smoothly and the sustainable development ability of the company is enhanced. The company has initially completed the preliminary exploration of Liulin Shixi, Wuxiang South, Heshun Hengling and Shunxi blocks. Among them, Liulin Shixi and Wuxiang south blocks have obtained the letter of approval for trial mining. By the end of July, 122 drilling wells, 53 fracturing wells and 19 trial operation wells had been completed in Block 4. In the first half of 1919, the wholly-owned subsidiary Lanyan coalbed methane successfully obtained 253.82 square kilometers and exploration rights in Fangdong block of Shunma; according to major asset restructuring commitments, Lanyan coalbed methane has obtained coalbed methane mining rights in Chengzhuang Coal Mine, Sihe Coal Mine (East District), Zhengzhuang Coal Mine and Hudi Coal Mine. Under the situation of clear planning objectives, it is expected that the progress of the company's new blocks will be significantly accelerated in the next 2-3 years, and gas sales are expected to achieve rapid growth. The smooth implementation of the above blocks will help to increase the company's coalbed methane resources reserves, expand the scale of coalbed methane business, and enhance the competitiveness and sustainable development of the company's coalbed methane industry.
Profit forecast and investment rating: according to the operation disclosed by the company's 2019 performance KuaiBao, and considering the principle of caution confirmed by subsidies, we expect the company's EPS to be 0.58,0.82,0.98 yuan respectively from 2019 to 2021, corresponding to 14,10 and 9 times PE, maintaining a "buy" rating.
Risk hint: the progress of the project is not as expected, the sales volume of coalbed methane is not as expected, the price of coalbed methane falls, and the subsidy policy changes.