Recently, we investigated Beijing shares. The basic conclusion was to maintain the logic of maintaining the trend of improving the main business and reforming assets of state-owned enterprises. Through field research, we inferred that we raised the valuation of land development to 2 billion yuan, maintained the “highly recommended” rating, and raised the target price to 17.12 yuan.
Investment highlights:
The company is a direct beneficiary of the Beijing-Tianjin-Hebei integrated national strategy. The core of the Beijing-Tianjin-Hebei strategy is the orderly removal of the capital's non-core functions. The three priorities are transportation, environmental protection, and industrial transfer, which directly benefits the company's LNG equipment. The centralization and serviceization of the city's industry has enhanced the use value of vacant land in the company's East Fifth Ring Road.
It was reiterated that the bottom of the main gas storage and transportation business cycle is logical, and the safety margin is estimated at 4 billion dollars. The widening oil and gas price difference increases the economy of LNG equipment, and environmental protection demand drives immediate demand for LNG equipment. The company's LNG product line covers bottles, tanks, cars, and stations. It has great technical and channel advantages. The share of LNG equipment will increase in the future, and the profitability of the main business can be expected to increase. We split the LNG business and industrial gas cylinder business into valuations of about 3 billion or 1 billion dollars.
Based on field research, we have raised the valuation of land development to 2 billion dollars. Based on the Beijing-Tianjin-Hebei policy and our field inspection of the site, we believe that the company's 87,000 square meters of industrial land in the East Fifth Ring Road is likely to be developed commercially. The company will independently select the plan with the best return from multiple planning plans, and it is expected that the plan will be determined within the year as soon as possible. 2. State-owned enterprise reform is the general trend; the pace depends on the Beijing State-owned Assets Administration Commission. As the sole listing platform for majority shareholders plus the majority shareholder's current securitization rate is 5% +the expected securitization rate of Beijing's state-owned assets in 2020 is a probable event. The exact timing depends on the plans of the Beijing State-owned Assets Administration Commission.
We think it is unlikely that the majority shareholders will reduce their holdings again in the near future, because they need to apply to the State Council to reduce their holdings by more than 5%.
The company is a highly flexible Beijing-Tianjin-Hebei integrated small market value target with a margin of safety. It maintained strong recommendations, raised the overall valuation to (40.19+20) * (1 +20%) = 7.2 billion yuan, and raised the target price to 1,712 yuan.
Risk warning: There is a possibility that the recovery of the main business, land use, and state-owned enterprise reform will fall short of expectations.