Core views

In 2023, the company achieved revenue of 30.929 billion yuan, an increase of 2.88% over the previous year, mainly due to the increase in the sales scale of urban pipeline gas in the current period compared to the previous period; net profit to mother was 1,440 billion yuan, an increase of 17.80% over the previous year, mainly due to the increase in profits in the urban gas sector and smart gas sector. The company achieved a year-on-year supply of 6.259 billion cubic meters of natural gas, an increase of 17.98% over the previous year, of which natural gas sales volume was 5.370 billion cubic meters, an increase of 21.38% over the previous year.

The company strengthens the advantages of establishing upstream and downstream integration in the gas industry chain, actively targets upstream gas resources, signs contracts with Dapeng LNG receiving station for gas sources, and targets land gas resources with CNPC, Sinopec, and BP China. Downstream companies actively develop value-added gas services, including products such as gas insurance, gas appliances, gas pipes and gas meters, and continuously improve the digital intelligence of terminals. We forecast that the company's net profit from 2024 to 2026 will be 1,716 billion yuan, 1,906 billion yuan, and 2,139 billion yuan, respectively, maintaining the “buy” rating.

occurrences

The company released its 2023 annual report

In 2023, the company achieved operating income of 30.929 billion yuan, up 2.88% year on year, net profit attributable to shareholders of listed companies, up 17.80% year on year, net profit attributable to shareholders of listed companies of 1,364 billion yuan, up 25.67% year on year; basic earnings per share of 0.50 yuan, up 19.05% year on year; weighted average return on net assets of 10.47%, up 0.82 percentage points year on year; pipeline gas users reached 7.63 million, up 1.2 million from the beginning of the year.

Brief review

Lower gas prices drive full-year profit recovery

In 2023, the company achieved revenue of 30.929 billion yuan, an increase of 2.88% over the previous year, mainly due to the increase in the sales scale of urban pipeline gas in the current period compared to the previous period; net profit to mother was 1,440 billion yuan, an increase of 17.80% over the previous year, mainly due to the increase in profits in the urban gas sector and smart gas sector. Against the backdrop of lower overseas gas prices, the company's overall profitability was restored. The annual gross sales margin was 15.5%, an increase of 0.85 percentage points over the previous year, mainly due to the increase in gross margin in the urban gas and smart service sectors. In 2023, the company's management rate, sales rate, and finance rate were 3.63%, 5.29%, and 1.12%, respectively, with year-on-year changes of +0.56, +0.21, and -0.22 percentage points. In 2023, the net cash flow from the company's operating activities was 2,543 billion yuan, an increase of 55.35% over the previous year; the net cash flow from investment activities was -40.57 billion yuan, an increase of 39.56% over the previous year.

Gas sales grew steadily throughout the year, strengthening the advantages of industrial chain integration. In 2023, the company completed the opening of 840,000 residential accounts and 14,000 non-residential installations. The number of gas users in Shenzhen reached 5.14 million, an increase of 940,000 households, and the penetration rate of pipeline gas reached 92%. The number of external pipeline gas users in Shenzhen reached 2.49 million, an increase of 260,000 over the previous year. The company achieved annual natural gas supply of 6.259 billion cubic meters, an increase of 17.98% over the previous year, of which natural gas sales volume was 5.370 billion cubic meters, an increase of 21.38% year on year, and natural gas transfer volume of 889 million cubic meters, an increase of 0.91% year on year. By region, Shenzhen sold 1.24 billion cubic meters of natural gas, up 5.17% year on year; sales outside Shenzhen were 2,091 billion cubic meters, up 14.89% year on year; power plants sold 1,509 billion cubic meters of natural gas, up 38.06% year on year.

The company strengthens the advantages of establishing upstream and downstream integration in the gas industry chain, actively targets upstream gas resources, signs contracts with Dapeng LNG receiving station for gas sources, and targets land gas resources with CNPC, Sinopec, and BP China. In 2023, the company's wholesale sales volume of natural gas was 530 million cubic meters, a year-on-year increase of 59.64%; the wholesale sales volume of liquefied petroleum gas was 433,500 tons, a year-on-year decrease of 24.69%. Downstream companies actively develop value-added gas services, including products such as gas insurance, gas appliances, gas pipes and gas meters, and continuously improve the digital intelligence of terminals. In 2023, the company's smart service business achieved revenue of 2.177 billion yuan, a year-on-year increase of 33.97%; gross profit margin was 49.54%, an increase of 0.86 percentage points over the previous year.

The integrated energy business developed steadily and maintained a “buy” rating.

The company held Swick in 2021 and entered the photovoltaic film industry. In 2023, Swick put into operation 16 production lines in Yancheng Phase I, adding 120 million square meters of production capacity. Swick achieved sales of 672 million square meters of photovoltaic film throughout the year, an increase of 32.32% over the previous year, and continued to maintain the second largest share in the global market. In 2023, the company signed a contract of 165,000 kilowatts of photovoltaics, and started construction of 80,600 kilowatts of photovoltaic projects nationwide, of which 63,700 kilowatts in Shenzhen, and the installed capacity of PV in operation reached 245,000 kilowatts. We forecast that the company's revenue for 2024-2026 will be 34.355 billion yuan, 37.102 billion yuan, and 39.987 billion yuan respectively; net profit to mother will be 1,716 billion yuan, 1,906 billion yuan, and 2,139 billion yuan respectively; EPS will be 0.6, 0.66, and 0.74 yuan/share, respectively, maintaining a “buy” rating.

Risk analysis

Risk of gas price fluctuations: Changes in the global natural gas supply pattern, international geopolitical influence, and international oil and gas price fluctuations may cause the company's gas source prices to rise. Sales prices in some of the company's natural gas terminal markets are controlled by the government, and there is a risk that upstream gas price increases cannot be transmitted in a timely manner.

Gas sales risk: The company's natural gas sales volume is affected by macroeconomics, industry policies, price fluctuations, demand changes, etc., and there is some uncertainty about the increase in the company's gas sales volume in industry, commerce, and power plants.

Risk of exchange rate fluctuations: Due to fluctuations in the RMB exchange rate, international procurement of liquefied natural gas and liquefied petroleum gas may face certain exchange risks.

Risk of fluctuations in the photovoltaic industry: The photovoltaic film business is greatly affected by fluctuations in raw material prices, fluctuations in industry production capacity, and changes in PV module procurement and installation policies, and there is some uncertainty about business performance.