Industrial gas signed a new order, optimistic about the bulk gas on-site gas production business model, maintained the “purchase” rating company's announcement to sign a daily operating contract, signed a “gas supply contract” with Shandong Ruilin Polymer Materials Co., Ltd. on May 21, 2024, and approved the construction of a new 23,000 Nm unit? The /h air separation unit and its ancillary facilities supply industrial gas products — oxygen and nitrogen — to each other. According to contract estimates, the contract amount is approximately RMB 1.86 billion (excluding tax), and the contract period is 20 years. The company needs to build a new air separation device and its ancillary facilities, and start gas supply no more than 18 months after the construction of the project is officially started. If this supply contract is successfully executed, it will have a positive impact on the company's future business performance, help enhance the company's sustainable profitability and core competitiveness, and bring beneficial help to collaboration between existing businesses. We continue to be optimistic about the long-term development space of the company's bulk gas on-site gas production business model and maintain profit forecasts. We expect net profit to be 4.05/5.06/625 billion yuan in 2024-2026. The current stock price corresponds to PE 21.3/17.1/13.8 times, maintaining a “buy” rating.
The on-site gas production business developed rapidly, successively achieving breakthroughs in small, medium, and large-scale on-site gas production projects. In 2023, the company signed a total of 5 small and medium-sized on-site gas production projects, including Zhejiang Hongxi, Maiwei Technology, and Zhejiang Guokang. A total of 9 on-site gas production projects were put into operation, including Ya'an Baitu, Ningbo Teresi, and Suzhou Weixin. Among them, the company established a large industrial division in June 2023 to develop medium and large-scale on-site gas production business; in August 2023, it obtained 3 air separation plant sites in Yuncheng City, Shanxi Province, to achieve a breakthrough in the medium-sized on-site gas generation (air division group) project.
In March 2024, the company signed a “Investment and Supply Contract” with Yingkou Jianfa Shenghai Nonferrous Chemical Co., Ltd., which achieved a breakthrough in large-scale on-site gas supply projects, and the overall service level was further verified by the market.
The photovoltaic and electronic large-scale on-site gas production business is progressing simultaneously, and the integrated strategic layout highlights the advantages of photovoltaics. In 2023, the company's gas supply projects for photovoltaic customers such as Yangzhou Jingao, Xuancheng Huasheng Phase I projects, and Hefei Daheng were put into operation, adding on-site gas production orders for Zhejiang Hongxi, Xuancheng Huasheng Phase II projects, and Wuxi Huasheng projects. In terms of electronic bulk gases, the company obtained three new electronic bulk gas carriers in 2023, including Wuxi China Resources Shanghua, Suzhou Longchi, and Xi'an Weiguang Technology. In addition, the company is actively building its own air separation project and planning surplus liquid from on-site gas production, and continues to promote the strategic layout of raw materials. The Suxiangjin Hongrun air separation project was successfully capped in June 2023, which will increase the company's self-sufficient production capacity of raw materials and lay a solid foundation for subsequent new on-site gas generation projects.
Risk warning: downstream demand falls short of expectations; capacity release falls short of expectations; customer acquisition falls short of expectations.