Performance review
1H23's performance exceeded our expectations
The company announced 1H23 results: revenue/net profit of 10.77 billion yuan/570 million yuan, a year-on-year increase of 20.3%/29.4%. The performance exceeded our expectations, mainly due to the high level of prosperity in the clean energy business.
Clean energy is growing rapidly, and liquid food is growing steadily. 1H23's clean energy revenue increased 34.4% year on year to 6.29 billion yuan. Among them, onshore clean energy/offshore clean energy/hydrogen energy business revenue increased 24.9%/82.7%/65.1% year on year, respectively. 1H23's chemical environmental revenue fell 3.9% year on year to 2.45 billion yuan, mainly because global demand for new standard tanks gradually returned to normal. The company's standard tank revenue fell 19.2% year on year to 1.34 billion yuan. 1H23's liquid food business revenue increased 17.3% year over year to 20.01 billion yuan, of which beer/non-beer business revenue was +12.9%/-36.9%, respectively.
Both gross profit margin and profit margin increased year over year. 1H23's gross margin was +0.5ppt to 16.5% year over year. Among them, the clean energy/chemical environment/liquid food business was +0.5ppt/+2.0pp/+1.9ppt to 12.2%/22.7%/22.2%, respectively. 1H23's sales/management/financial expense ratios were level/+0.1 ppt/flat year on year, respectively. 1H23's net interest rate was +0.4ppt to 5.3% year-on-year.
Development trends
Downstream demand for LNG is booming. According to the National Development and Reform Commission, 1H23 China's apparent natural gas consumption was 194.9 billion cubic meters, an increase of 6.7% over the previous year; the CICC Oil and Gas Chemical Group expects China's apparent natural gas consumption growth rate to rise to 5% in 2023. Looking at prices, according to the National Bureau of Statistics, as of August 20, 2023, the domestic LNG market price was 3,769 yuan/ton, down 55% from the 2022 high of 8,437 yuan/ton; the CICC Chemical Group expects short-term demand from China and Europe to rise or catalytic gas prices to rise, and medium- to long-term prices to continue to fall. Considering the increase in natural gas consumption and price stability, we believe it is expected to drive the company's onshore clean energy business downstream to maintain prosperity and support revenue growth.
There are sufficient shipbuilding orders in hand. In the context of the advent of the shipping exchange cycle and stricter environmental emission reduction requirements, the 1H23 liquefied gas vessel market is gradually heating up, and the ship construction industry has entered a new boom cycle. 1H23 signed 8 new shipbuilding orders (contract amount over 1.7 billion yuan) and received 4 alternative ship orders. We believe that the company's current shipbuilding orders are sufficient, which is expected to support the company's subsequent increase in offshore clean energy revenue.
The hydrogen energy business is growing rapidly and is expected to gradually expand as the market matures. According to the company's announcement, 1H23 signed 350 million yuan of new hydrogen energy orders, an increase of 50% over the previous year; as of the end of 1H23, the number of hydrogen energy orders was 370 million yuan, an increase of 116.9% over the previous year, all of which maintained rapid growth.
Profit forecasting and valuation
Maintain outperforming industry ratings. Considering the high clean energy boom, we raised the 2023/24 EPS by 6%/9% to 0.60/0.66 yuan. The current stock price corresponds to 11.4x/10.0x P/E in 2023/24. Maintaining the target price of HK$11.35, corresponding to 16.9x/14.8x P/E in 2023/24, there is 48% room for upside.
risks
New business expansion fell short of expectations; overseas demand declined.