Event: On August 24, 2023, the company released its 2023 semi-annual report. In the first half of 2023, the company achieved operating income of 1,187 million yuan, an increase of 5.18% over the previous year; realized net profit of 321 million yuan, a year-on-year decrease of 12.25%; achieved net profit of 317 million yuan after deducting non-attributable net profit of 317 million yuan, a year-on-year decrease of 13.17%.
In 23Q2, revenue increased month-on-month. Excluding the impact of government subsidies, net profit returned to the parent group increased year-on-year.
At 2023Q2, the company achieved operating income of 616 million yuan, up 1.08% year on year and 7.77% month on month; realized net profit of 85 million yuan, down 9.74% year on year and 64.12% month on month. Since the company received high government subsidies in 2022, excluding government subsidies according to the announcement, it can be obtained that in 2023Q2, the company's main business achieved net profit of about 85 million yuan, an increase of 2.80% over the previous year. However, due to seasonal effects in the non-heating season, the sales price of coalbed methane will decline month-on-month, and as a result, net profit to the mother fell 42.35% month-on-month.
Volume and price have risen sharply, and costs have increased. 2023H1, the company sold 597 million cubic meters of coalbed methane, up 2.05% year on year; the average unit price was 1.92 yuan/cubic meter, up 2.47% year on year; the average unit cost was 1.15 yuan/cubic meter, up 6.88% year on year; realized gross margin was 40.08%, down 2.47 pct.
The exploration block continues to advance, and the future space is vast. Additional reports on proven coalbed methane reserves in the Heshun Hengling, Wuxiangnan, and Liulin Shixi blocks were reviewed and filed by the Shanxi Provincial Department of Natural Resources in 2022, adding 22.866 billion cubic meters of proven reserves. Up to now, the Wuxiang South Project has invested a total of 645 million yuan, and the Heshun Hengling Project has invested 479 million yuan.
The Energy Administration has mentioned many times that it is struggling to increase oil and gas storage and production, and Shanxi Province has responded by promoting the construction of unconventional natural gas bases. In recent years, the national energy system and oil and gas industry have anchored the goals of the “seven-year action plan” and continuously strengthened policy supply. In July of this year, the National Energy Administration organized a promotion conference to vigorously enhance oil and gas exploration and development efforts in 2023 to continue to study and deploy the next steps. According to wind data, as of July 2023, China's apparent natural gas consumption was 223.7 billion cubic meters, up 6.4% year on year; cumulative natural gas production was 1,340 cubic meters, up 5.7% year on year; and total coalbed methane production was 7.6 billion cubic meters, up 13.2% year on year. Among them, the Shanxi region, as a region rich in coalbed methane, promotes “three-gas co-mining” of unconventional natural gas throughout the province. In the first half of 2023, coalbed methane production in Shanxi alone reached 5.2 billion cubic meters, an increase of 12.7% over the previous year, accounting for 68.6% of the country's coalbed methane production.
Investment suggestions: The company lays out an integrated upstream, middle and downstream coalbed methane industrial chain, and has rich coalbed methane resource reserves.
We expect the company's net profit for 2023-2025 to be 659/8.25/1,063 million yuan, and EPS 0.68/0.85/1.10 yuan/share respectively. Corresponding to PE on August 25, 2023 will be 11 times, 9 times, and 7 times, respectively, and maintain the “recommended” rating.
Risk warning: risk of falling coalbed methane prices; risk of gas well exploration and mining falling short of expectations; risk of insufficient policy support.