Deep ploughing "pipeline transportation + urban combustion" will benefit from the growth of the natural gas market. Coverage for the first time, giving a "buy" rating
After years of development, relying on Shaanxi Gas Group and the rich natural gas resources in the province, the company has formed a green resources transmission and distribution network that runs through the north and south of Shaanxi, extends the east and west wings of Guanzhong and the province's "one network". Driven by the policy, China's natural gas consumption is expected to maintain high growth during the 14th five-year Plan period, and we are optimistic about the company's future performance growth potential. We estimate that the net return of 2022 and 2023 in 2024 will be RMB 6.6 million, an increase of 56.9%, 7.0%, 6.6% and 0.59, 0.64, respectively, corresponding to the latest share price PE of 11.7, 10.9, 10.2. Cover for the first time, giving a "buy" rating.
The long-distance pipeline runs from north to south to east to west, and has obvious regional competitive advantages. the pipe network that the company has built runs through the north and south of Shaanxi and extends to the east and west of Guanzhong, covering 11 cities (districts) of the province, with a total mileage of about 3833 kilometers, accounting for more than 85% of the total mileage of self-built long-distance pipelines in the province. The company's pipeline has a gas transmission capacity of 16.5 billion cubic meters per year, as well as the construction and operation of 8 CNG gas mother stations, natural gas control and command centers and other supporting facilities, forming a gas supply pattern of pipeline natural gas, compressed natural gas and liquefied natural gas, which has obvious regional competitive advantages in Shaanxi Province.
Benefiting from the market-oriented reform of natural gas, the company's profits are stable. The goal of China's natural gas price reform is to "control the middle and let go of both sides", that is, to liberalize the gas source and sales prices formed by the market, and to straighten out the price transmission in the upper, middle and lower reaches of the industrial chain. The pricing of pipeline transportation and gas distribution adopts the permitted rate of return model. According to the policy of Shaanxi Provincial Development and Reform Commission, for the long-distance pipeline network in the province, the reasonable rate of return is 7%, and the corresponding benchmark load rate is 60%. The two main businesses of the company are respectively in the pipe network transportation link and the urban gas distribution link, and the profitability is linked to the pipe transport price and gas distribution price, which is not affected by the fluctuation of natural gas price. According to the investor relations activity record sheet, the rate of return of the company pipeline can basically reach or close to 7%. Since 2016, the company's total profit has been in the range of 400 million to 700 million yuan, and its profitability is stable.
High dividend underestimates the value of the target, highlighting the value of allocation
According to the announcement of the implementation of rights and interests distribution in 2022, the total dividend of the company is 330 million yuan, with a dividend rate of 54%.
Over the past three years, the company's average dividend rate has been 64%, higher than the half-yearly dividend rate in 2022. For the sake of conservatism, we assume that the dividend scale in the second half of 2022 is the same as that in the first half of the year, then the annual dividend level is 660 million yuan, corresponding to the previous share price, the dividend yield is 8.3%, and the high dividend yield highlights the allocation value.
Risk hints: natural gas sales fall short of expectations; pipeline prices fall sharply; city gas business expansion falls short of expectations; macroeconomic growth falls short of expectations.
