Key points of investment:
The company is a major distributor of refined oil products in the Pearl River Delta region. The company is one of the main distributors of refined oil products in Shenzhen and the Pearl River Delta region, and is also the only large-scale liquid chemical storage enterprise in Shenzhen. Wholesale and retail of refined oil products, liquid chemical storage and chemical trade, and power investment are important business components of the company.
The company has franchise qualifications for refined oil products, liquefied petroleum gas, hazardous chemicals, and the qualification to build and operate gas stations on highways in Guangdong Province. It has the largest 35,000-ton petrochemical terminal in western Shenzhen, exclusive rights to the 300-meter wharf shoreline, and 71368.5 square meters of storage land in Qianhai. The company has 12 gas stations in Guangdong Province, 74 liquid chemical storage tanks and the liquid chemical bonded warehouse with the largest storage capacity in Shenzhen. It integrates oil product distribution and liquid chemical warehousing.
Benefiting from the pricing mechanism for refined oil products, the profit of refined oil products increased dramatically. The “floor price” pricing mechanism introduced by the NDRC brings an opportunity for the company to expand the price difference between gasoline and diesel. At the beginning of the year, the company made full use of the country's policy of not adjusting domestic refined oil prices when crude oil prices fell below 40 US dollars/barrel to drastically increase inventories and lock in profit margins at gas stations. Inventory levels are adjusted in a timely manner according to price trends throughout the year. When prices are high, a negative inventory operation model is even used to accurately seize several procurement opportunities, reduce overall procurement costs, and increase the gross profit of gas station retail. In 2016, the company sold 173,300 tons of oil products, a decrease of 3% over the previous year; achieved revenue of refined oil products of 870 million yuan, a decrease of 10% over the previous year; the comprehensive gross profit margin was 17.65%, an increase of 4.7 percentage points over the previous year; and net profit was 78.43 million yuan, an increase of 48% over the previous year. Operating performance reached a record high.
Liquid chemical warehouses are in a state of loss. In terms of liquid chemical warehousing, the competitiveness of the regional chemical industry is weak, and storage demand is shrinking; however, the reservoir area has many difficulties in developing new customers due to free trade zone planning restrictions and the surrounding environment that is not conducive to normal operations such as daily handling and delivery of goods. Safety supervision and customs supervision restrictions are becoming more and more stringent; the costs invested in the maintenance of old equipment, water environment maintenance, etc. also place a burden on the company's operations.
The total volume of the company's warehousing business entered in 2016 was 115,800 tons, an increase of 10% over the previous year; the reported net profit was -1.94 million yuan, and losses decreased 65% over the previous year.
Hazardous chemicals are in the pioneering stage. Since the second half of 2015, Guangjuyida has focused on developing hazardous chemicals trading business. In 2016, the company actively explored business models and steadily cultivated the market. Various operating indicators such as sales volume, operating income, and profit increased significantly. In 2016, a total of 39 types of chemicals were sold, with sales volume of about 0.17,000 tons, an increase of 866% over the previous year; operating income of 5.43 million yuan, an increase of 655% over the previous year; operating costs of 4.36 million yuan, an increase of 687% over the previous year; the consolidated gross margin was about 19.61%, a decrease of 3.3 percentage points over the previous year; net profit - 260,000 yuan, a decrease of 76% over the previous year.
Participate in electricity and banks. The company holds 12.22% of the shares of Shennan Electric, 6.42% of Mawan Electric, and 3.79% of Baosheng Village Bank's shares. Mawan Electric maintains a stable return on investment. Shennan Electric has been at a loss for the past two years. Last year, it transferred 75% of its shares in Zhongshan Shenzhong Real Estate Investment and Real Estate Co., Ltd. and Zhongshan Shenzhong Real Estate Development Co., Ltd. for 1.03 billion yuan, greatly increasing the company's investment income.
Profit forecasts and ratings. The company's EPS for 17-19 is expected to be 0.57, 0.61, and 0.64 yuan. Referring to the industry's average valuation level in 2017, it is 24 times that of the company's average valuation level in 2017. Based on the company's competitive position in the Pearl River Delta region, the company will be given 30 times PE, with a target price of 17.1 yuan. The first coverage will give an increase in holdings rating;
Risk warning. Demand for refined oil products fell short of expectations.