Investment points:
Based in Anhui and radiating East China, the location advantage is obvious. The actual controller of the company is Anhui Energy Group. Based on the long-distance pipeline business, the company is actively expanding CNG/LNG sales business and urban gas business. In 11-15, the supply of natural gas in Anhui Province increased from 1.4 billion cubic meters to 2.3 billion cubic meters. The company is based in Anhui and radiates East China, has obvious location advantages, and is expected to benefit from continued growth in demand for natural gas in Anhui in the future.
It is the only long-distance pipeline operator in the province. The upstream gas source is stable, and downstream demand continues to increase. The company is the only long-distance natural gas pipeline operator in Anhui Province. A total of 18 long-distance gas feeder lines have been built and put into operation in the province, with a total length of about 1,039 kilometers, covering 14 cities in Anhui Province. The company is also connected to the “West-East Gas Transfer” and “Sichuan-East Gas Transfer” dual gas sources, and has established a long-term stable gas source cooperative relationship. Downstream demand, driven by urbanization and industrialization in Anhui Province, continues to increase. Over the past 16 years, the company's long-term pipeline business performance has fluctuated due to government gas price cuts and pipeline transportation costs. The four long-distance pipeline projects raised this time will continue to improve the company's pipeline network and promote the continuous growth of the pipeline transportation business.
The urban gas business is gradually entering a harvest period, and competition in the CNG/LNG business is increasing and performance is under pressure. The company owns gas business concessions in 13 specific regions of the province. The “urban gas+long-distance pipeline” business has a synergistic effect and enhances the company's overall competitive advantage. The urban combustion business is in its infancy, with few downstream users and high fixed costs, but through the company's active development, the loss margin of the city fuel business is expected to gradually narrow, and in the future it will become a new driving force for the company's performance growth. The company currently operates 5 CNG gas filling stations in the province. Since 2015, the pace of construction of CNG mother stations in the province has accelerated, and competition in the industry has continued to intensify. Affected by this, both the company's CNG business revenue and gross profit declined sharply in the first half of '16.
Profit forecast and valuation: We expect the company to achieve operating income of 21.55, 26.83, and 3,546 million yuan in 16-18, and net profit of 0.91, 108, and 147 million yuan. The company's total share capital is 336 million shares, and 84 million tradable shares were issued this time, so the corresponding fully diluted earnings per share for 16-18 were 0.27, 0.32, and 0.44 yuan/share. Referring to the industry average and the valuation situation of comparable listed companies, we gave the company 20-25 times PE in '17, and the reasonable stock price range for the company was 6.4-8.0 yuan/share.
Special reminder: The IPO pricing predicted in this report is not the price performance on the first day of listing, but rather a reasonable price range when the current market environment remains essentially unchanged.