23H1 Net profit attributable to shareholders increased by 29.4%, and the clean energy business grew at an impressive rate
2023H1 had revenue of 10.8 billion yuan/yoy +20.2%, gross profit margin of 16.5% /yoy+0.6pct, core net profit of 626 million yuan/yoy +17.7%, and net profit attributable to shareholders of 568 million yuan/yoy +29.4%. The rapid increase in profits is mainly due to: 1) global demand continues to pick up and the chemical tank/liquid food industry is booming; 2) demand for clean energy equipment represented by hydrogen energy is growing rapidly; 3) the booming shipbuilding industry. We raised our profit forecast. We expect the company's EPS for 2023-2025 to be RMB 0.64/0.76/0.90 (previous value: RMB 0.62/0.73/0.81), respectively. According to the segment valuation method, we are given a reasonable market value of RMB 20.57 billion/HK$22.17 billion, and a target price of HK$10.97 (previous value of HK$11.33), “buy”.
Natural gas consumption is picking up, demand for storage and transportation equipment is improving, and revenue from the clean energy sector increased by 34.4% year on year
Along with lower LNG prices and improved demand for storage and transportation equipment, the 23H1 clean energy sector achieved revenue of 6.294 billion yuan/yoy +34.4%, gross profit margin of 12.2% /yoy+0.5pct, and new orders of 7.91 billion yuan/yoy +47.6% were signed in this sector. 1) Benefiting from the global green shipping upgrade and booming shipbuilding industry, the company signed orders for 8 new ships in the first half of the year, with a contract amount exceeding RMB 1.7 billion, and alternative orders for 4 new ships. As of 23H1, the company signed a new water clean energy order of about RMB 3.0 billion /yoy +106.7%.
2) The company's hydrogen energy production, storage, transportation, processing and integrated solutions are industry-leading. The 2023H1 hydrogen energy sector achieved revenue of 270 million yuan/yoy +59.1%, and hydrogen energy orders of 370 million yuan/yoy +116.9%. It is estimated that the company's sales revenue of hydrogen energy products is expected to maintain a high growth trend in the next three years.
The profitability of the chemical environment improved, liquid food revenue increased steadily year-on-year, and the chemical environment business achieved revenue of 2,451 billion yuan/yoy -3.9%, and a gross profit margin of 22.7% /yoy+2.0pct. As the global tank supply and demand allocation was balanced, demand for new standard tanks gradually returned to normal; the specialty tank market benefited from the new energy and chip industries, and demand remained at a high level. The liquid food business achieved revenue of 2,012 billion yuan/yoy +17.3%, gross profit margin of 22.2% /yoy +1.9%. Orders for beer turnkey projects increased sharply in the first half of the year. In June of last year, Mexico won a bid for a large-scale spirits project worth nearly 94 million euros (about 670 million yuan), so the cumulative number of new signings during the period decreased compared to last year.
The target price is HK$11.33, maintaining the “buy” rating
The segmental valuation method is used. In the clean energy sector business, consider that comparable company Shudao Equipment lost money in '22, and is expected to reverse the loss in '23 and bring a higher PE. This gives the company 15 times its reasonable 2023 PE, with a market value of RMB 8.08 billion yuan in '23 (net profit forecast of 539 million yuan*15x PE in '23). In the chemical tank business, refer to the comparable company 23PE with an average value of 14x, and the company's leading position, with a market capitalization of 6.33 billion yuan (net profit of 422 million yuan* 15 times PE). For the liquid food equipment business, refer to the comparable company 23PE with an average value of 18x, with a market value of 6.15 billion yuan (net profit of 342 million yuan* 18 times PE). A reasonable market value of RMB 20.57 billion/HK$22.17 billion, and a target price of HK$10.97 (previous value of HK$11.33), “buy”.
Risk warning: The industry's downstream demand recovery falls short of expectations, exchange rate fluctuations risk, and the promotion and use of clean energy falls short of expectations.