1Q24 results are in line with our expectations
The company announced 1Q24 results: revenue of 34.2 billion yuan, -0.4% year on year; net profit to mother of 1.08 billion yuan, corresponding to profit of 0.35 yuan per share, core profit (company caliber) of 1.08 billion yuan, -12.8% year on year. After excluding Xinao Energy (Xinao-H) overseas LNG trading business profit, the company's domestic basic business core profit was +17.8% to 1.07 billion yuan, in line with our expectations.
1Q24's natural gas sales volume was 10.04 billion square meters, +5.5% year over year, of which the platform traded gas sales volume was 1.21 billion square meters, +33.6% year over year.
Development trends
Driven by peak/reserve demand, domestic platform trading momentum is expected to continue to grow rapidly. Benefiting from 1) falling international LNG spot prices, the company increased its import efforts; 2) CNPC's long-term agreement was fulfilled; 3) downstream customer coverage expanded, and 1Q24's domestic platform gas sales volume increased by +95.5% year-on-year to 833 million square meters. Looking ahead, considering 1) Overall LNG prices tend to rise and fall in summer, we think the company is expected to make full use of the infrastructure pivot capacity of the Zhoushan LNG terminal. 2) The company currently uses peak-shifting/reserve services to enter downstream urban fuel/power plant/large industrial users. It has flexible and differentiated competitive advantages over the natural gas wholesale model, which mainly involves signing annual contracts for the three major oils. We judge that the gas sales volume of the company's domestic platform trading gas business will grow by more than 30% in 2024.
The LNG price returned to a reasonable range or further weakened the business cycle nature of the platform's trading gas. We believe that with the gradual release of new global LNG production capacity from 2025, LNG spot prices are expected to gradually return to a reasonable range. The company's platform trading gas business model will gradually switch from international LNG trade, which had a high cyclical nature in the past, to a more stable and sustainable “using the Zhoushan LNG receiving station as a fulcrum, importing LNG resources with cost advantages from overseas, and selling them through an expanded customer network to obtain a relatively stable unit profit”. Starting in 2025, the profit stability and sustainability of the platform's direct sales gas business will be stable and sustainable. Further enhancements.
There is still potential to improve dividends. The company promises a dividend of not less than 0.91/1.03/1.14 yuan per share in 2023-2025, and the 2023 dividend is in line with the guidelines. Considering that the subsequent capital expenditure of Xinao-A's proprietary business is relatively small, we judge that the company's medium- to long-term dividend payment capacity still has a lot of room to improve.
Profit forecasting and valuation
The profit forecast for 2024 and 2025 remains unchanged. The current stock price corresponds to the 2024/2025 price-earnings ratio of 9.0 times/8.2 times. Maintaining an industry rating and a target price of 25.00 yuan, corresponding to 12.7 times the price-earnings ratio of 2024 and 11.6 times the price-earnings ratio of 2025, there is 41.1% upside compared to the current stock price.
risks
LNG prices fluctuated greatly, and the net price for residents fell short of expectations.