Shareholders' net profit fell 11.0% year-on-year in the first half of 2023
The company's 2023 interim results fell slightly short of expectations. Shareholders' net profit for the first half of the year fell 11.0% year on year to 1.44 billion yuan (RMB, same below), mainly due to: (1) Natural gas business revenue falling 2.8% year on year to 6.63 billion yuan. natural? Sales volume fell 5.8% year on year to 2059 million cubic meters, of which wholesale and retail volumes fell 4.9% and 6.4% year on year, respectively, to 1,108 and 912 million cubic meters; (2) shrinking gas sales margin led to a decline of 4.1 percentage points to 7.6% year on year, and related gross profit margin fell 36.8% year on year to 5.0 billion yuan.
Gas business is expected to improve in the second half of the year
Although the mid-term performance falls short of expectations, we believe that the natural gas business is expected to improve in the second half of the year. The main reasons are: (1) China's economy is recovering, driving demand for natural gas consumption by industry and commerce; (2) the upstream and downstream price linkage of natural gas has been actively promoted, which is conducive to stabilizing the company's gas sales gap. We expect the company to complete 2023? Sales volume rose 0.4% year over year to 399 million cubic meters.
The target of the second phase of the Tangshan LNG project is to be put into operation in 2025. The profit contribution will increase and the long-term development layout of the company has already shown results in stages. In June of this year, the first phase of the Hebei Tangshan LNG project (including 4 LNG storage tanks and an 8-266,000 square meter LNG ship berth, with a design handling capacity of 5 million tons/year) was officially put into operation. The overall completion progress of the second phase of the Tangshan LNG project (including 8 LNG storage tanks and a berth for 1-266,000 square meters of LNG ships, with a design handling capacity of 5 million tons/year) has reached more than half, with the goal of putting it into operation in 2025. Phase 3 (including 8 LNG tanks) is expected to be put into operation by 2030. Due to the initial stage of operation of the first phase, it is expected that the profit contribution to this year and next two years will be limited, but it is believed that the project's profit will reach 180 million yuan in 2025. In the long run, after the second and third phases are put into operation one after another, the profit contribution will increase dramatically.
Maintain a “buy” rating
In response to our interim results, we lowered our 2023-25 shareholders' net profit forecasts by 10.1%, 5.6%, and 2.3%, respectively. Maintaining 6.0 times the target price-earnings ratio for 2024, we lowered the target price of H shares from HK$5.03 to HK$4.65, corresponding to a 68.3% increase. Reiterate the “buy” rating.
Risk warning: (1) accounts receivable risk, (2) a sharp drop in grid-connected electricity prices, and (3) a sharp rise in natural gas costs.