Key points of investment
Business transformation, revenue growth. Beilan Blue Sky has completely switched from a printing company to a distributor in the gas sector; from 2013 to 2017, the company achieved a revenue growth of nearly tenfold. The company's gross profit has grown rapidly since 2015; net profit lost 12.49 million in 2017 due to reduced confirmed income from the sale of subsidiary shares, increased financial costs, and net exchange losses.
Industry view: Domestic gas consumption is high, and the LNG import market is hot. Together, we have ushered in a golden investment period in the gas sector. In recent years, the government has placed higher demands on the energy consumption structure. The goal is to increase the share of China's natural gas consumption in primary energy from 6.2% in 2017 to 10% by 2020, and reach 15% by 2030. The vigorous promotion of “coal-to-gas” policies in various regions has also created huge demand. Currently, the conflict between supply and demand in the domestic natural gas market is prominent. If demand that is growing too fast cannot be effectively resolved, the supply gap will drive an investment boom in the gas sector. On the other hand, the position of LNG in imported gas sources has increased markedly, and investment and construction projects for receiving stations have attracted capital. From 6 in 2010 to 20 in early 2018, the number of LNG terminals has more than tripled in ten years.
Our opinion: The company seized the development opportunities of natural gas sales and LNG terminals, quickly entered the market through investment and acquisition, and occupied a certain stable share; this move has a high strategic vision. The acquisition of the Tangshan Caofeidian Terminal is also a significant step. The layout of the entire LNG industry chain will bring a qualitative leap forward in the company's 2018 performance. We recommend investors actively pay attention to the subsequent operation of the Tangshan Caofeidian LNG terminal and the gas sales volume of the Guangxi Tengxian project.
Risk warning: The performance of the acquired gas project fell short of expectations; the performance growth of the Tangshan Caofeidian LNG terminal fell short of expectations.