Description of the event
2024H1 achieved revenue of 6.727 billion yuan, +4.40% year over year, and realized net profit of 0.437 billion yuan to mother, -16.76% year over year.
Among them, 2024Q2 achieved revenue of 3.422 billion yuan, +8.45% year-on-year, and realized net profit to mother of 0.233 billion yuan, or -6.33% year-on-year.
Incident comments
Revenue increased year over year, and profit decline narrowed. 2024Q1's revenue was +0.51% YoY, and net profit to mother was -26.15% YoY.
Q2 Revenue growth increased month-on-month, and profit decline narrowed month-on-month. The gross margin of the gas sales and air separation equipment business all declined from month to month. The gross margin of 2023H1 gas sales/air separation equipment was 21.1%/31.65%, respectively, and 2024H1 fell to 18.42%/25.44%, respectively. The main reason was that air separation prices continued to fall year on year, putting pressure on the profitability of the gas business.
Gas prices have bottomed out and wait for the gas business boom to recover. Since 2024H1, gas prices have declined year over year, but liquid oxygen and liquid nitrogen have stabilized month-on-month. In August 2024, the average monthly price of liquid oxygen rose 2.1% month on month, down 18.56% year on year; the average monthly price of liquid nitrogen was -12.5% year on year, +8.3% month on month; the average monthly price of liquid argon decreased 16.16% month on month, down 38.13% year on year. It is expected that as economic expectations improve, downstream related industries will gradually recover, which may drive demand in the gas market.
Orders for air separation equipment and petrochemical equipment are in good condition, and orders for petrochemical equipment have exceeded 23 years. The total order value of 2024H1's equipment was 3.781 billion yuan, and 14 sets of large and medium-sized air separation equipment were signed, including 7 extra-large air separation units of 0.06 million or more. Petrochemical equipment received 23 new contracts, with a cumulative contract amount of 0.763 billion yuan. The company's key projects have progressed smoothly. Shandong Hangshi's 105,000 nm/h air separation has entered the critical delivery and installation period, the first 3 sets of Yulong Hang Oxygen's 80,000 nm/h air separation sets have entered the commissioning period, and domestic plate-fin heat exchangers have also been very well used. The overseas market for equipment continues to expand. The company's foreign trade volume of air separation equipment has exceeded the total volume for 23 years, and has signed orders such as 64,000 nm/h for India and 50,000 nm/h for Mexico. Petrochemical engineering accounts for 32% of foreign trade orders, and the export value of complete plate-fin heat exchangers, cold boxes, and LNG projects has increased.
Gas retail sales remained flat, liquid sales continued to grow, and market share was further expanded. 2024H1, the company's gas sales achieved revenue of 4.024 billion yuan, which was basically the same as the previous year. The average price of gas has declined slowly, and liquid sales have continued to grow. The company achieved zero breakthroughs in the fields of silicone and pan-semiconductors (sensors, automotive semiconductors), completed the market-based promotion of two projects, pure oxygen combustion and pure oxygen refining, and made new progress in the fields of PSA, hydrogen, and healthcare.
Invest in the establishment of a wholly-owned subsidiary, acquired air separation assets, and invested in the construction of two 30,000 nm/h air separation plant projects. The company invested in the establishment of Nanchang Hangzhou Oxygen Gas Co., Ltd. to implement three sets of 16300 nm/h, 10,000 nm/h, and 4,500 nm/h air separation devices and 4 6000/85 VPSA devices owned by the transferee Fangda Special Steel, and the gas company invested in the construction of two 30,000 nm/h air separation devices. The total investment is estimated at 493 million yuan, of which the total investment in asset acquisition and contract transfer is 115.78 million yuan, and the total investment in building a new air separation unit is 367.22 million yuan. The company has signed a gas supply contract with Fangda Special Steel. The project contract period is 21.5 years.
The company is expected to achieve net profit of 1.106 and 1.332 billion yuan in 2024/2025, corresponding to 15/13 times PE.
Risk warning
1. The risk of increased competition in the industry;
2. The risk of poor gas price performance.