Incidents:
On April 19, 2024, Guangzhou Steel Gas released its 2024 quarterly report: 2024Q1. The company achieved operating income of 461 million yuan, an increase of 11.33% over the previous year; realized net profit of 67 million yuan, a year-on-year decrease of 10.18%; and realized net profit without return to mother of 65 million yuan, a year-on-year decrease of 12.44%.
Investment highlights:
Revenue growth has slowed, mainly due to a sharp drop in helium prices. 2024Q1, the company's revenue increased 11.33% year on year (Yoy-33.87pct). The increase was mainly due to the successive commissioning of new electronic bulk gas projects, but was partially offset by the sharp drop in helium gas prices over the same period last year. Helium price changes had a multiplier effect in the process of transmission from the revenue side to the profit side, resulting in a year-on-year decline of 10.95pct to 30.74% in gross margin.
The sales/management/R&D expense ratio was basically stable (YOY-0.91/-0.70/-0.14pct), and the financial expense ratio decreased by 2.71 pct year-on-year, mainly due to the company's use of some idle raised capital to purchase term deposits, which brought in interest income of 13.8554 million yuan, compared to 2712,000 yuan in the same period last year. The income tax rate fell 2.81 pct year on year to 2.26%, and the final net interest rate fell 3.17 pct year on year to 14.62%.
Major electronics stock projects have been commercialized one after another, and the production capacity of the new winning projects has led the industry. In terms of inventory, since 2023, various electronic bulk gas projects such as the Hefei Comprehensive Insurance Zone, Huaxing Optoelectronics T9, Hefei Changxin Phase II, Beijing Changxin Electric Collection, and Shanghai Dingtai Ingenuity have continued to be built and commercialized one after another. In terms of growth, according to Zhuochuang News data, in 2023, the company's electronic bulk gas business reached 11.75% of the domestic market share in terms of revenue; the domestic market share of production capacity meters that won the bid for new projects in the field of integrated circuit manufacturing and semiconductor displays reached 24.60%, second only to liquefied air (24.80% share). The new projects include Xi'an Xinxin, Guangzhou Zengxin, Guangzhou Guangxin, Shenzhen Sefa, and Beijing Xilex. The leading position of domestic investment was further consolidated.
The electronic special gas project progressed smoothly, and the one-stop service capacity was enhanced. In the process of providing on-site gas generation services for electronic bulk gases to existing customers, the company accurately learned their needs for electronic specialty gases, and used this as an opportunity to expand the specialty gas business. As of 2024Q1, the board of directors of the company has reviewed and approved two specialty gas investment projects, including: 1) investing no more than 535 million yuan to build a nitrogen trifluoride electronic specialty gas R&D project; 2) investing no more than 393 million yuan to build an electronic specialty gas production and development project such as hydrogen bromide in the Hefei Economic and Technological Development Zone. The development of specialty gas business helps reduce comprehensive procurement costs for customers, thereby enhancing customer stickiness and forming a 1+1>2 synergy effect with the electronics bulk business.
The profit forecasting and investment rating company has formed autonomous and controllable technical capabilities around the helium gas supply chain, and has become the first domestic gas company to enter the global helium supply chain. We are optimistic about the company's long-term subsequent development. We forecast revenue of 2024/2025/2026 of 22.39/28.40/37.31 billion yuan, and net profit to mother of 3.54 billion yuan (4.45/612 million yuan), corresponding to PE of 35/27/20 times, respectively, maintaining a “gain” rating.
Risks indicate that downstream customers' gas consumption falls short of expectations; the risk of a sharp drop in gas supply prices; the construction progress of projects under construction falls short of expectations; the risk of large fluctuations in stock prices in the secondary market; the risk of declining market share of core resources; and the risk of falling gross margin.