1H24 performance slightly exceeded our expectations
The company announced 1H24 results: revenue of 92.9 billion yuan, +6.7% YoY; net profit to mother of 3.305 billion yuan, +2.6% YoY, corresponding to earnings of 0.38 yuan per share, slightly exceeding our expectations, mainly because the profitability of the LNG processing and storage/LPG sales sector was better than expected. The company plans to pay an interim dividend of 0.16 yuan/share, corresponding to a 1H24 dividend rate of 43%. The dividend is in line with the previous guidelines.
1H24's retail gas sales volume is 16.3 billion square meters, +10.3% YoY, of which industrial and commercial gas volume is 13.26 billion square meters, +16.8% YoY, retail gas purchase and sales price difference 0.45 yuan/square meter, -0.045 yuan/square YoY; LNG receiving station average load rate 85.4%, +3.6ppt YoY, LNG plant average load rate 58.4%, +19.5ppt YoY, main factor processing gas volume +92.5% to 1.3 billion square meters YoY ; LPG sales volume was 2.93 million tons, which was basically the same as the previous year.
Development trends
The gross margin declined year over year or was mainly due to structural effects. 1H24's gross margin declined year on year, lower than market expectations. We believe that the main reason for the decline in price spreads is 1) some high gross margin (over 1 yuan/square) gas station business placement (1H24's gas station volume is -34.6%), and 2) large industrial customers with relatively low price differences (we estimate 0.2-0.3 yuan/square meter) in new industrial and commercial gas volumes; if we exclude the influence of these two factors, we estimate that the company's overall gross margin remains reasonable and stable.
The 2H24 gas volume growth rate is expected to continue to lead the industry. With the advantages of industrial chain integration and the resource-side support of the parent company, the company's gas sales growth rate has clearly outperformed peers since 2019, and its market share has steadily increased. Looking ahead, we believe that 2H24's gas volume growth rate is expected to continue to be around 10%, benefiting from macroeconomic restoration and the increase in the utilization rate of electric/photovoltaic glass/petrochemical customer production capacity developed by the company in recent years.
The profitability of the 2H24 LNG processing, storage and transportation sector is expected to continue to increase. Benefiting from the increase in the load ratio, 1H24's profit before tax in the LNG processing and storage sector was +22.9% to 1.65 billion yuan compared to the same period. Based on the current domestic gas supply and demand situation, we judge that there is still plenty of room for a month-on-month increase in the average load ratio of the company's LNG terminals and LNG plants in the second half of the year, and profitability is expected to continue to improve.
Earnings in the LPG sector are expected to maintain steady growth. 1H24's LPG sector achieved rapid growth in pre-tax profits through methods such as increasing direct industrial supply and customer development. Looking ahead, benefiting from the increase in the company's LPG resources, we believe that the profit scale of the company's LPG business is expected to maintain steady growth in the medium to long term.
Profit forecasting and valuation
The profit forecast for 2024 and 2025 remains largely unchanged. The current stock price corresponds to 2024/2025 8.8x/8.2x P/E. Maintaining an outperforming industry rating and a target price of HK$8.50, corresponding to 2024/2025 10.3x/9.6x P/E, with 17.4% upside compared to the current stock price.
risks
LNG prices fell sharply, and macroeconomic recovery fell short of expectations.
