Brief comment on performance
In the first half of 2020, the revenue was 2.1 billion yuan,-12.99% compared with the same period last year; the net profit was 357 million yuan, + 274.82%; and the non-return net profit was 119 million yuan, + 71.41% over the same period last year. Of this total, Q2 revenue was 1.381 billion yuan, + 1.16% compared with the same period last year; net profit from home was 314 million yuan, + 495.77% from the same period last year; and 82 million yuan was deducted from non-return net profit, which was + 63.27% from the same period last year.
Business analysis
The reduction in the price of raw materials offset the decline in demand in the epidemic, and the level of profitability rose further. Affected by the epidemic, pipeline sales in the first half of 2020 were 410100 tons,-9.17% compared with the same period last year; the income growth rate of galvanized steel pipe, steel-plastic composite pipe, spirally welded pipe and straight seam submerged arc welded pipe was-8.2%, 0.1%, 10.8%, 2.64% respectively. The prices of hot rolled strip steel 180% 2.5 and zinc ingot steel in 2020H1 are-3.5% and 22.8% respectively compared with the same period last year (the two together account for 87% of the company's operating cost). Thanks to the decline in raw material costs and the company's continuous promotion of fine management to reduce costs and increase efficiency, the gross profit margins of the above four types of pipes are 14.9%, 27.0%, 17.5%, 15.1%, respectively, and + 2.7/+4.0/+2.6/+0.2pct. Drive the overall gross profit margin to a record high of + 2.3pct to 16.8% compared with the same period last year.
The capital structure continued to be optimized, and the subsidiary asset collection contributed 228 million yuan to the profit and loss of disposal. During the 2020H1 period, the expense rate decreased by 0.2pct to 8.9% compared with the same period last year, and the financial expense rate reached the lowest level of 0.22% in nearly nine years. At the same time, the capital structure has been continuously optimized, and the asset-liability ratio of H1 has dropped by 4.2pct to 27.3% compared with the same period last year. Q2 Huzhou Jinzhou Oil and Gas Pipeline Company completed policy collection and confirmed 228 million yuan in profit and loss on asset disposal.
The mixed reform of the national pipe network company introduces multi-party cash investment, and the thickening capital is conducive to the follow-up trunk pipeline investment and construction. Petrochina Company Limited and China Petroleum & Chemical Corp basically realized pipeline divestiture. At present, the National Pipe Network Company has six major long-distance pipeline networks, including the China National Petroleum Pipeline and the West-to-East Gas Pipeline, which are expected to start operation in Q4, and the follow-up trunk line interconnection construction is ready for development. In addition, the National Pipe Network Company introduced Chengtong, Social Security Fund and other shareholders through mixed reform, all of which contributed in cash, totaling about 266 billion yuan. At present, there is a big gap between the mileage of China's natural gas pipeline network (76000 km in 18 years) and the target of 10.4 km in 2020 and 163000 km in 2025, and the improvement of the financial strength of the national pipeline company will help to speed up the construction of long-distance pipeline. as one of the most complete oil and gas pipeline manufacturers in China, the company will fully benefit the pipe demand brought about by the accelerated construction of oil and gas pipeline network.
Investment suggestion
Taking into account the significant improvement in gross margin and asset disposal gains and losses in 2020-2022, we expect the company to maintain a "buy" rating of 1.13,0.73 (up 7 per cent) and 0.78 (down 6 per cent) in 2020-2022, corresponding to a multiple of PE in 7-10-10.
Risk hint
The speed of pipeline construction is not up to expectations, the price of raw materials is rising, and the gross profit margin of low-price competition in the industry is falling.