Events:
1. The company released results KuaiBao: revenue of 1.54 billion yuan in 2019, an increase of 355% over the same period last year; operating profit of 420 million yuan, an increase of 955% over the same period last year; and net profit of 74.01 million yuan, up 1219% over the same period last year.
two。 Petrochina Company Limited coalbed methane company received a total of 90.26 million yuan in tight gas subsidies from 2018 to 2019. CNPC proposes to distribute it according to the proportion of Shilouxi's sales income. Zhongwobang, the company's holding subsidiary, is expected to receive a subsidy of 78.52 million yuan (87%).
3. The company plans to raise 1.1 billion yuan through a non-public offering of shares, of which 580 million yuan will be used to buy 10% of the shares in Zhongwobang. After the transaction, the proportion of equity enjoyed by the company will be increased from 48.32% to 58.32%. Another 520 million of the funds raised are used to repay loans and replenish liquidity (179 million to repay loans from Jichuan Holdings, 148 million to repay bank loans, and 202 million to replenish liquidity).
Main points of investment:
The company enjoys a 58.32% interest in Zhongwa Bond, which greatly improves the company's profitability: in early 2018, the company began to issue shares and pay cash several times to buy a stake in Zhongwobang. After raising funds in this non-public offering, the company will indirectly control 60.50% of Zhongwobang and 58.32% of its equity, making it the largest shareholder of Zhongwobang.
Zhongwobang has obtained the exploration, development, production and management rights of natural gas in the west block of Shilou through cooperation with CNPC. Since the merger of Zhongwobang in 2019, its excellent operating performance has led to the growth of the company's operating income and various profit indicators. The company's annual revenue was 1.54 billion yuan, an increase of 355% over the same period last year, and its net profit was 74.01 million yuan, an increase of 1219% over the same period last year.
Zhongwobang is a high-quality tight gas production manufacturer: China's natural gas production and consumption are increasing year by year, while the gap between supply and demand is gradually expanding. The relevant policies of the oil and gas industry will still encourage private capital to participate in oil and gas cooperative development for some time to come. The cooperation between Zhongwobang and CNPC in natural gas development in the west of Shilou is a model of cooperation between private enterprises and oil companies. The west area of Shilou is rich in gas reservoirs with 44.3 billion square economic recoverable reserves. At present, 500 million square meters / year of natural gas exploitation license has been obtained in 18 well areas to enter the stage of commercial exploitation, and the 1.2 billion square meters / year production project in 45-18 well area has been put on record with the National Energy Administration.
The 30-well area plan passed the CNPC review to subsidize the thickening performance: the 1.2 billion square meter / year development plan of the 30-well area in the west of Shilou has passed the CNPC review in January 2020. At the same time, the state subsidies for tight gas and other unconventional natural gas currently use more subsidies, winter winter supplement policy and unconventional natural gas subsidy policy will continue to the "14th five-year Plan" period. At present, Zhongwobang tight gas subsidy has been landed, in the future, with the promotion of Yonghe 45-18 well area project and Yonghe 30 well area project, the natural gas production in Shilou West area is expected to be greatly increased, and the continuous subsidy will significantly increase the performance.
Give a "buy" rating. Regardless of the impact of this non-public offering, the previous profit forecast for 2020-2021 revenue of 22.8 yuan, 4.07 billion yuan; return to the mother net profit of 3.97 yuan, 808 million yuan; dynamic PE of 12, 6 times, maintaining the "buy" rating.
Risk hints: the risk of non-public offering not being completed successfully; the risk that natural gas production does not meet expectations; the risk of uncertainty in the time of obtaining new well mining licenses; the risk of falling natural gas prices, etc.