occurrences

Shencold Co., Ltd. released its 2020 interim report. From January to June 2020, it achieved operating income of 182 million yuan, a year-on-year decrease of 6.87%; achieved gross profit of 35.81 million yuan, an increase of 9.51% over the previous year; and achieved net profit attributable to the parent company of 9.38 million yuan, a decrease of 5.43% over the previous year.

reviews

Business revenue for the second quarter of 2020 was confirmed to be in line with expectations, with significant year-on-year and month-on-month increases. It is expected that the performance recovery trend in the third quarter will continue

In January-June 2020, it achieved revenue of 182 million yuan, a year-on-year decrease of 6.87%; achieved gross profit of 35.81 million yuan, an increase of 9.51% over the previous year; and realized net profit attributable to the parent company of 9.38 million yuan, a decrease of 5.43% over the previous year.

A consolidated gross profit margin of 19.72% was achieved, an increase of 2.95 percentage points compared to mid-2019 and an increase of 1.87 percentage points compared to the full year of 2019.

In the second quarter of 2020, the company achieved operating income of 149 million yuan, an increase of 14.71% over the previous year; achieved gross profit of 36.56 million yuan, an increase of 109.03% over the previous year; and achieved net profit attributable to the parent company of 19.02 million yuan, an increase of 192.65% over the previous year.

A comprehensive gross profit margin of 24.56% was achieved, up 11.08 percentage points year-on-year compared to the second quarter of 2019, and 26.85 percentage points month-on-month compared to the first quarter of 2020.

The year-on-year growth rate of the company's revenue, gross margin, and net profit returned to the mother in the second quarter all achieved sharp increases. The market successfully reversed losses. The company's third quarter was still the peak settlement season, and performance recovery is expected to continue. In the first half of 2020, the total amount of new contracts signed by the company was 503 million, mainly involving natural gas liquefaction plants, liquid air separation devices, gas filling stations, gas storage and peak adjustment devices. The volume of orders carried over by the company can still cover the revenue we predicted for the past two years, and the company's performance in the past two years is highly certain.

The company has fully benefited from hydrogen energy infrastructure construction and continues to promote the layout of the hydrogen energy industry. The company has the ability to provide one-stop solutions for the design and manufacture of complete equipment such as hydrogen production, hydrogen liquefaction, hydrogen refueling, etc. During the reporting period, the company actively carried out marketing work for liquid hydrogen devices and hydrogen refueling stations in accordance with domestic hydrogen industry policy guidelines and market development trends. The company already has the technical and equipment capacity to provide liquid hydrogen and hydrogen refueling station equipment.

The company will continue to invest in the construction of a cryogenic hydrogen energy equipment base in Datong City, Shanxi Province, and plans to invest in projects such as liquid hydrogen plants, hydrogen refueling stations, and hydrogen energy equipment production bases in Datong step by step. The company also plans to jointly invest in Jiaxing Chenyi Ruizhi Investment Partnership (limited partnership) with China Energy Engineering Group North Co., Ltd., Hebei Maya Equity Investment Fund Management Co., Ltd., and other investors. The focus is on investing in and deploying projects related to the utilization of hydrogen energy, including 5-ton liquid hydrogen plants per day, hydrogen refueling stations, and equity investments in hydrogen fuel cell companies.

The company's shares were traded, and the majority shareholder became a trading enterprise. Before the actual controller became a share transfer from the Sichuan Provincial State-owned Assets Administration Commission, Xie Lemin and his co-actors held a total of 43,142,733 shares of the company, accounting for 34.60% of the company's total share capital. Mr. Xie Lemin was the actual controller of the company. After the share transfer is completed, Trading Investment Industrial will hold 12,133,561 shares of the company, accounting for 9.73% of the total share capital of the listed company. Xie Lemin, Cheng Yuan, Wen Xiangnan, Cui Zhixiang, and Zhang Jianhua will entrust the voting rights of all of their remaining 24,587,262 shares (accounting for 19.72% of the total share capital of Shenleng shares) to Trading Investment Industrial to exercise the voting rights of the listed company. Invest in the industry to become The controlling shareholder of the listed company, the Sichuan Provincial State-owned Assets Administration Commission became the actual controller of the listed company.

By integrating the operating facilities and outdoor advertising resources of the highway service area under the Sichuan Trading Group, Trading Investment Industrial Company improved the upstream and downstream industrial chains of the business, and established four main businesses: energy (including gas stations, gas stations, charging stations (piles)), service area management (non-oil operation projects in service areas), commerce (commodity trade, international trade, hotels, convenience supermarkets, restaurants, etc.), and transportation media (including vehicle leasing, commuter transportation, warehousing and distribution, etc.). When a downstream customer of the existing business of a listed company of Trading Industrial becomes the controlling shareholder, they can have substantial business synergies with the company, which will clearly benefit the company's business development.

Sichuan Transportation Investment Group Co., Ltd. is the controlling shareholder of Trading Industrial Company. The State-owned Assets Supervision and Administration Commission of the Sichuan Provincial Government holds 100% of the shares of Sichuan Transportation Investment Group Co., Ltd. through holding Sichuan Development (Holdings) Co., Ltd., which indirectly controls Trading Industrial Company and is the actual controller of the Trading Investment Industrial Company.

Profit forecasting

The company's medium-term gross margin was slightly lower than our expectations, so we adjusted our profit forecast appropriately. We expect the company to achieve operating income of 520, 623 and 747 million yuan in 2020 and 2022, with net profit attributable to the parent company of 0.30, 0.38 and 45 million yuan. The company's latest total share capital is 125 million shares, corresponding to EPS 0.24, 0.30 and 0.36 yuan. On August 27, 2020, the latest stock price was 15.77 yuan, corresponding to a market capitalization of 2 billion yuan. In 2020-2022, PE was about 65, 52 and 44 times. The company's core LNG equipment business in 2019 is likely to be a cyclical inflection point. In the future, it will return to a booming path. Considering the company's layout in hydrogen energy utilization, we will maintain the company's “increase in holdings”

ratings.

Risk warning: The recovery in demand for LNG equipment fell short of expectations; construction of hydrogen energy infrastructure fell short of expectations.