Main points of investment
Items:
The company released three quarterly results: from January to September 2017, the company achieved operating income of 689 million yuan, down 6.98% from the same period last year, and the net profit of shareholders belonging to the parent company was 65.06 million yuan, down 27.21% from the same period last year.
Peace viewpoint:
Equipment sales have declined and overall gross profit margins have fallen: gas station equipment and energy engineering solutions are the company's two main sources of revenue. According to the announcement, the operating income of the parent company (mainly engaged in the production and sales of gas station equipment) decreased by 51.2% in the third quarter compared with the same period last year, which is much larger than the decline in overall operating income. The sales income of gas station equipment in the overall business income decreased significantly compared with last year. As the gross profit margin of the engineering solution is lower than that of equipment sales at gas stations, the company's overall gross profit margin fell to a certain extent from January to September compared with the same period when the proportion of revenue from equipment sales at gas stations decreased.
Maintain the judgment that 2017 is the low point of the company's performance: there are two main reasons for maintaining this judgment: first, domestic LNG heavy truck sales continue to exceed expectations. From January to September, LNG heavy truck sales were nearly 70,000 vehicles, an increase of 615% over the same period last year. The growth of downstream heavy truck sales is expected to lead to a gradual recovery of investment in gas station construction. Second, the company signed the Shale Gas Comprehensive Utilization Strategic Cooperation Agreement with Yongchuan District of Chongqing in August. It is estimated that the total investment scale of the agreement is about 4 billion, in which a large proportion of the projects involved are expected to be converted into the company's operating income, significantly thickening the company's performance next year and the year after next.
Investment suggestion: the gradual increase in the permeability of domestic LNG heavy trucks is expected to drive the demand for gas filling station equipment; in addition, the strategic cooperation agreement on comprehensive utilization of shale gas signed between the company and Yongchuan District of Chongqing will significantly increase the company's performance next year and the year after next. Maintaining the previous performance forecast, the company's EPS from 2017 to 2019 is expected to be 0.46,0.81,1.19 yuan respectively, and the price-to-earnings ratio of the previous share price is 36 times, 20 times and 14 times respectively. Maintain the "highly recommended" rating.
Risk hint: the agreement with the Yongchuan district government is not progressing as expected.