An industrial gas leader in central China, it has laid out two major industrial parks to expand into high-end materials such as electronic specialty gases. The company has been deeply involved in industrial bulk gases for 20 years. In 2020, the company plans to invest 760 million yuan to build the Qianjiang Electronic Special Gas Industrial Park, and plans to increase the total investment of 5 billion yuan to build the Yichang Electronic Specialty Gas and Functional New Materials Industrial Park in 2022. According to the company's announcement, the Qianjiang Park can achieve revenue of 770 million yuan/year after completion, delivery, and the total revenue of 6 billion yuan/year after completion of production.
Product production capacity in the two major industrial parks has been implemented one after another, and customer and order development has shown results. 1) Qianjiang Park: Focus on planning nitrogen and hydrogen specialty gas products, mainly high-purity ammonia and high-purity hydrogen. The layout products include 20,000 tons/year of electronic-grade high-purity ammonia and 32,000 m3/year of electronic-grade high-purity hydrogen; by January 2024, the overall construction of the Qianjiang Industrial Park was basically completed. The high-purity ammonia was in the trial production stage. The quality reached 7N and the production line was stable. High-purity carbon monoxide, high-purity methane, and industrial methane production lines have been built and put into operation and sold. 2) Yichang Park: Focus on planning silicon-based products such as electronic grade silane and fluorine-containing special gases. The layout products include 20,000 tons/year of electronic grade silane, 50 tons/year of hexafluorobutadiene, 2000 tons/year of nitrogen trifluoride, 500 tons/year of tungsten hexafluoride and other new silicon-based functional materials project plans; by January 2024, production lines for silicon trichloride and silicon tetrachloride have been stably operated and sold. 5000t/a electronic grade silane, new silicon-based functional materials and fluorine-based electronic gas are under construction and installation. It is expected that 24H1 will be completed and put into operation by the end of 2023; 15,000 t/a electronic grade silane will be completed and put into operation by the end of 2023 Construction officially started Construction phase. 3) Integrated production+location advantage enables the company to occupy a favorable competitive position. On the one hand, the company's high-purity ammonia and electron-grade silane use an integrated production process to recycle by-products+raw materials, which can effectively control product production costs; on the other hand, the two major industrial parks have obvious location advantages and can reach many downstream electronic semiconductor customers in Hubei. The company joined forces with Jingke Energy to sign a strategic cooperation agreement in October 2023, agreeing to sell electron-grade high-purity ammonia products and electronic-grade silane products to the subsidiaries and affiliated companies of Shangrao Jingke Energy. The estimated amount of the agreement was 600 million, enhancing the certainty of the release of new products.
The mature product business is growing steadily, and channel capabilities continue to be empowered. The company's production capacity for mature products continues to expand, creating a basic market for steady growth. The company has built four major liquid gas production bases and an efficient logistics network covering the Hubei region. Combined with the efficient channel management capabilities brought about by innovative gas cylinder circulation models, mature product businesses and new product businesses such as electronic specialty gas are expected to collaborate and complement each other in terms of raw materials/production/transportation/customer/management.
Profit forecast: As a leading gas company in central China, the bulk gas business has deep operating experience and channel accumulation. With plans to build two industrial parks in Qianjiang and Yichang, the company has entered the circuit of emerging materials such as electronic gas in a big way, creating a new performance growth pole, with remarkable growth. The company's net profit for 2023-2025 is expected to be 0.9/23/430 million yuan respectively, with year-on-year growth rates of 19.4%/158.6%/85.1%, respectively. Corresponding to the current PE stock price, the PE is 42.9x/16.6x/9.0x, respectively, covered for the first time, giving it a “buy” rating.
Risk warning: There is a risk that the increase in raw material costs exceeds expectations, the construction of major projects and the introduction of product sales falls short of expectations, new supply in the industry exceeds expectations, safe production, and the data used in the report is lagging behind or not being updated in a timely manner.