Key points of investment:
Event: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 4.522 billion yuan, +17.70% year-on-year; net profit to mother was 240 million yuan, or -34.38% year-on-year. With 2024Q1, the company achieved revenue of 1,155 billion yuan, -11.06% year on year; net profit to mother was 69 million yuan, -66.29% year over year.
Ocean gas volume has a large impact on land gas sales, and the narrowing of price differences puts pressure on overall performance. In 2023, the company's natural gas supply and pipeline operation business achieved revenue of 4.283 billion yuan, +19.58%; gas sales volume reached 1,547 billion cubic meters, +32.06% year over year, mainly due to continuous stable supply after ventilation of the Shen'an Line pipeline, and gas sales volume increased over the same period last year; the company achieved gross operating profit of 812 million yuan, a year-on-year decrease of 124 million yuan, of which the company's pipeline gas sales volume mainly affected the company's pipeline gas sales. The gas sales price difference decreased throughout the year, operating profit declined, and overall operating performance fell short of expectations.
Buyback and dividends are carried out simultaneously to stabilize long-term customer cooperation. According to the company's announcement, in response to the stock downturn, the company chose to repurchase and cancelled the repurchased shares; in addition, the company has clarified the dividend plan, and still uses 20% of the profit to stabilize and co-develop with long-term strategic partners, maintain the layout of the entire industry chain of upstream resource mining, midstream long-term pipeline+downstream terminal market, and strive to include more industrial customers in the scope of the company's direct supply services and increase direct sales volume.
Actively establish gas source connections to achieve expected increases & benefits. In 2023, the company plans to participate in the restructuring transaction of China Oil and Gas Holdings and signed a restructuring document with the relevant parties on the restructuring transaction plan with effective conditions. Furthermore, under the guidance of the national environmental protection policy, the company has actively seized opportunities to upgrade gas industries such as alumina, coal mines, quartz sand, glass, ceramics, power generation, and cement within the business area, and has successfully attracted more customers, which is expected to lead to increased performance. According to the company's announcement, the company currently transports more than 6.5 million m3/day of gas during the off-season, including direct sales of more than 3 million m3/day and delivery of more than 3.5 million m3/day; the company targets direct sales volume of 5 million m3/day during the off-season, reaching more than 2 times the current gas volume in winter, so it is expected to sell more than 2 billion square meters of gas this year. In terms of price difference correction, the company has signed a relevant conservation poly agreement with CNOOC's gas power group to ensure basic income during the off-season and CNOOC's overall production increase target in Shaanxi and Shanxi, to help the company close a certain gap between supply and marketing during the peak season, and profitability is expected to be repaired.
Profit forecasting and investment advice. The previous values of 24-25 revenue and net profit to mother were 89.94/10.762 billion yuan and 1,106/1,456 billion yuan, respectively. Based on the financial data of the company's 23 annual report, we adjusted the core performance variables (gross margin of gas business) and added a profit forecast for 26 years. The company's 2024-2026 revenue is estimated to be 59.25/70.52/8.135 billion yuan, respectively, and the net profit to mother is 38/4.78/638 million yuan, EPS is 0.42, 0.55, 0.73 yuan/share, corresponding PE is 14.2, 11.4, and 8.6 times, respectively, maintaining the company's “buy” rating.
Risk warning: cyclical fluctuations in the industry; risk of production safety; risk of restructuring transactions falling short of expectations; risk that public materials used in research reports may lag behind or not be updated in a timely manner