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热中石化冠德(00934.HK)首次覆盖:业务有望全面增长

中金公司 ·  Dec 12, 2017 00:00  · Researches

For the first time, investment highlights covered Sinopec Guande Company (00934) with a recommended rating. The target price is HK$6.39, corresponding to a price-earnings ratio of 10/8 times in 2018/2019. The reasons are as follows: All three main lines of business are expected to achieve a steady increase in profit. 1) We expect that in 2016-2019, the turnover volume of the Yulin-Jinan long-distance gas pipeline (Yuji line) owned by Guande (product of actual gas transmission volume and transportation distance) may achieve a compound growth of nearly 19%, and operating profit CAGR may reach 74%. 2) The operating rate of many coastal refineries in China is expected to increase in the next two years. Guande Holdings and several coastal crude oil storage terminals in which Guande Holdings has a stake may achieve a compound increase of 13% in handling volume between 2016 and 2019, and operating profit CAGR may reach 12%. 3) All of the LNG carriers Guande has invested in are expected to be put into operation in 1H18. The 2016-2019 voyage CAGR may reach 63%, and the financial costs of ships may also drop significantly during the same period. The contribution of the shipping business to the company's net profit may achieve a compound growth of 135%. The company's net profit is expected to increase by 43% in 2017, and the first half of the year and the second half of the year may increase by 37% and 49%, respectively. The company's net profit CAGR is expected to reach 26% in 2016-2019. The possibility of continued M&A expansion. From 2011-2015, Guande obtained interests in assets such as crude oil storage terminals and cross-provincial natural gas pipelines from its parent company Sinopec Corporation. We do not rule out an opportunity for the company to acquire oil and gas storage and transportation assets or related interests again in the future. What is our biggest difference from the market? The Development and Reform Commission completed a cost review of the main natural gas lines (including the Yuji Line) this year, and adjusted pipeline fees. We judge that the negative impact of this round of supervision on the Yuji Line is very limited, and that regulatory risks within the next two years have basically been released. Potential catalysts: In the future, the difference in gas consumption during the off-peak season in North China is expected to increase rapidly, and the turnover of the Yuji Line may exceed expectations; the increase in the operating rate of many coastal refineries may cause the handling volume of crude oil storage terminals to exceed expectations. Profit forecast and valuation We expect the company's 2017-2019 EPS to be HK$0.58, $0.67, and $0.80, respectively, with a CAGR of 26%. Currently, the company's stock price corresponds to the 2017-2019e price-earnings ratio of 8 times, 7 times, and 6 times, respectively. Using the DCF valuation method, we obtained a target price of HK$6.39 based on a 7.0% WACC and a 0% sustainable growth rate, corresponding to a price-earnings ratio of 10/8 times in 2018/2019, respectively, and gave it a “recommended” rating. Risk The Yuji Line may once again face the regulatory risk of cost monitoring and rate adjustments in September 2020; if Sinopec's old refinery begins relocation, it will have a negative impact on some crude oil storage terminals in Guande; and overseas warehousing operations may be disrupted by local policies or turbulent situations.

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