Xincheng Securities: Looking forward to investing in Binhai to HK$1.98. Natural gas sales volume and price will rise sharply in 2024, which may drive full-year results
Glonghui, April 9 | Xincheng Securities released a research report today saying that Binhai Investment's revenue in 2023 was HK$6.407 billion, up 5.0% year-on-year; gross profit was HK$749 million, up 3.0% year-on-year. It shows that the company's business is growing rapidly. Profit attributable to shareholders was HK$257 million, down 21.2% year-on-year, mainly due to the continued rise in SOFR during the year, which led to an increase in the financing costs of US dollar syndicated loans. Looking at the half-year spin-off, 20231H shareholders should account for about HK$166 million in profit, down 35.5% from year to year. It is estimated that the profit attributable to 20232H shareholders is about HK$90.18 million, up 33.2% year-on-year from the profit attributable to 20222H shareholders, which is an increase of 33.2% year-on-year, indicating that the company's worst period in 20232H has passed, and its performance has regained momentum for rapid development.
According to Xincheng Securities, the Group's total gas sales in 2023 reached 2,217 billion cubic meters, an increase of 9.4% year-on-year. Among them, pipeline gas sales increased by 12.3% year-on-year to 1,610 billion cubic meters. Compared with the increase of 0.91% and 7.2% in 20231H, respectively, both growth rates increased significantly. China's economy is recovering after the epidemic. The country's apparent consumption of natural gas was 394.53 billion cubic meters, an increase of 7.6% over the previous year. However, the Binhai Investment Pipeline gas growth rate was superior to the macro market, demonstrating the Group's determination and ability to develop customers.
According to Xincheng Securities, the Binhai investment business is rooted in Tianjin and covers the whole country. Currently, the company has cooperated with the four major LNG terminals in Tianjin, and upstream gas resources are fully guaranteed, which is expected to have an advantage over the future development of the same industry. The company signed a number of large-scale industrial customers and projects in 2023, including the Yaohua Glass Project, Yunhai Project Phase II, the Military Liangcheng Power Plant, etc., as well as the newly launched gas source trading business. The increase in gas volume will be reflected in 2024 results, and overall sales are expected to increase by about 15% year on year. In terms of gas prices, if the company has adjusted the price and the amount of gas for civilian use rises further to 90% and the gas purchase cost does not fluctuate significantly, the company's gross margin may increase by another 0.05 yuan. Therefore, it is expected that the sales price of the company's natural gas will rise sharply, and there will be an opportunity to drive revenue and further increase gross profit. Meanwhile, the two major shareholders, Tianjin Teda and Sinopec, provided significant support to the company, and also provided considerable support for the company's continued business development and transformation into a comprehensive energy supplier. On the macroeconomic side, China's economy continues to recover, and demand for energy will increase. Under the principle of a dual carbon policy, demand for clean energy will further increase. As a result, the company may continue to benefit from the development of the industry.
Xincheng Securities gave Binhai Investment a “buy” rating, with a target price of HK$1.98, a potential increase of 67.8% from the closing price of HK$1.18 on April 5.