Zitong Financial APP learned that GF Securities Co., LTD. released a research report saying that thanks to the good development of wind power and gas business in 00956, Xintian Green Energy (2017) saw revenue growth of more than 60 per cent and profit growth of 136 per cent in the first three quarters. The agency believes that the company is valued at a low level and maintains a "buy" rating.
Significant increase in income and profit
The company achieved a total revenue of 4.341 billion yuan in the first three quarters of 2017, a substantial increase of 62.16% over the same period last year. At the same time, the company's net profit was 593 million yuan, an increase of 136.53% over the same period last year. The company's revenue growth is mainly due to the contribution of wind power business and gas business. Wind power generation exceeded expectations in the third quarter, and gas retail business performed prominently. We expect that with the increase in heating demand in the fourth quarter, the natural gas business is expected to drive continued earnings growth.
Wind power: power generation exceeds expectations, and high-quality wind power assets are on hand.
In the third quarter of 2017, the company's wind power business generated 1.11 billion kilowatt hours, an increase of 147.28% over the same period last year, higher than expected. As of September 2017, the company's cumulative wind power generation was 4.54 billion kilowatt hours, an increase of 64.04% over the same period last year.
The growth in electricity generation is mainly due to:
1) the incremental effect brought by the new installation.
2) the company's better advantage of wind resources and higher utilization hours in Hebei Province drive the growth of wind power generation.
According to the company's quarterly wind power generation statistics from 2016 to 2017, the year-on-year growth in the third quarter was much higher than that in the previous two quarters, due to poor wind conditions in the area where the company's turbines were located in the first half of 2017 and improved in the third quarter. The implementation Plan to solve the problem of abandoned Water, Wind and Light issued by the National Development and Reform Commission and the Energy Bureau will further improve the situation of abandoned wind in the industry, and the impact of "cogeneration" in the heating season in 2017 is expected to be weaker. The company expects to add about 500WM wind power to the grid in 2017, and we expect the company's wind power to grow by about 45% for the whole of 17 years.
Natural Gas: continue to be optimistic about the growth of Retail Business and benefit from Environmental rectification
By the end of September 2017, the company had sold 1.174 billion cubic meters of natural gas, an increase of 67.2 percent over the same period last year, of which the wholesale volume of natural gas was 644 million cubic meters, an increase of 29.73 percent over the same period last year, and the retail volume of natural gas was 474 million cubic meters, an increase of 210.32 percent over the same period last year. The recovery of retail business is mainly due to the "coal to gas" central heating and the recovery of gas consumption of industrial enterprises in Shahe area. Recently, some glass enterprises in Shahe area that do not use natural gas as fuel have stopped production and rectification, while the company's glass enterprise customers all use natural gas as fuel, which will benefit from environmental protection rectification, and gas consumption will further increase.
The company's gas source mainly comes from Petrochina Company Limited Company. China Petroleum & Chemical Corp's pipeline gas source is introduced into Shahe area, and the gas consumption is relatively stable. The company adopts active strategies to ensure the supply during the winter heating period, and the shortage of gas sources in the industry has little impact on the company's profits. It is expected that the growth trend of natural gas retail business in the heating season will be maintained in the fourth quarter.
Profit Forecast and Investment rating
On December 15, 2017, Xintian Green Energy (0956.HK) closed at HK $1.96. we expect the company's EPS from 2017 to 2019 to be RMB 0.239, 0.276 and 0.316 respectively, corresponding to PE of 6.7X, 5.8X and 5.1x, which is at a low level and maintains a "buy" rating.
Risk hint
Economic growth is slowing; natural gas sources are tight and prices are rising; the risk that the new growth rate of wind power is not up to expectations, the risk of wind power price reduction, and the interest rate risk of borrowing funds (Editor: Wang Mengyan)