Urban fuel in the Foshan region, transformation into a comprehensive energy service provider under the “Energy+Technology+X” strategy:
The company is an urban gas operator in the Foshan region and has gradually expanded to other locations in recent years. Driven by the continuous promotion of industrial coal-to-gas conversion in Foshan, the company's gas sales volume has grown rapidly in recent years. According to annual reports from previous years, the company's gas sales volume increased from 1,702 billion square meters in 2018 to 4.05 billion square meters in 2022, with a compound annual growth rate of 24.2%. The company's performance grew steadily. Operating income increased from 4.292 billion yuan in 2017 to 18.923 billion yuan in 2022, with a compound growth rate of 34.5%; net profit of the mother increased from 347 million yuan in 2017 to 655 million yuan in 2022, with a compound growth rate of 13.5%. The company adheres to the strategic direction of “energy+technology+X, moving towards carbon neutrality” and accelerates the transformation from a single urban fuel to a comprehensive energy service provider. Hydrogen energy is the company's key transformation direction.
Costs and gas prices are beneficial, and the performance of the main urban fuel business has reached an inflection point:
According to the Foshan City Plan, the target scale of natural gas consumption in Foshan by 2025 will reach 5.9-7.2 billion m2/year, which is expected to increase by 35.8-4.88 billion m2/year compared to 2020. There is still great potential for gas sales growth. Due to the rise in upstream gas prices, the company's gross margin has continued to decline over the past two years. As domestic and foreign market-based natural gas prices have declined, the downstream price situation has improved, and the overseas low price agreement signed by the company and Chenil/Bibi/Sinochem has begun to fulfill the contract, the gross margin and performance inflection point in the company's main urban gas business has reached.
The hydrogen energy industry in Foshan nurtures pioneers in hydrogen energy technology, leading diaphragm compressor technology:
Relying on the hydrogen energy industry in Foshan, the company is expected to become a pioneer in hydrogen energy technology. Currently, the company has deployed many hydrogen energy technologies in the field of hydrogen energy, such as SOFC solid oxide fuel cells, skid-mounted natural gas hydrogen production equipment, and diaphragm compressors. Among them, currently the most noteworthy is the diaphragm compressor product of Forentiangao, a holding subsidiary. Diaphragm compressors do not pollute the gas medium and are widely used in hydrogen energy filling and use. According to the company's annual report, in 2022, Forentiangao ordered more than 150 diaphragm compressors, with a total order value of over 65 million yuan, an increase of about three times over 2021. According to Shiyin Energy Chain, the production capacity of the first phase of Forentiangao has reached 500 units/year, and the production capacity of the second phase is expected to reach 1,000 units/year. The future development prospects are promising.
Investment advice:
The company issued a restricted stock incentive plan in June 2023. The performance assessment required that the company's operating income for 2023-2025 should not be less than 23.654 billion yuan, 28.385 billion yuan, and 32.642 billion yuan respectively; earnings per share should not be less than 0.75 yuan/share, 0.82 yuan/share, and 0.90 yuan/share, respectively.
We expect the company's revenue in 2023-2025 to be 24.5 billion yuan, 29.9 billion yuan and 36.2 billion yuan respectively, with growth rates of 29.6%, 21.8%, and 21.14%, net profit of 739 million yuan, 976 million yuan and 1,266 million yuan respectively, with growth rates of 12.7%, 32.2% and 29.7% respectively, with outstanding growth; the company's main urban combustion industry is expected to recover, and the hydrogen energy industry layout is beginning to flourish, and diaphragm compressor technology is leading. For the first time, the investment rating of -A has given the company 16 times more profit in 2024 The rate, corresponding to the target price for 12 months, is 16.32 yuan.
Risk warning: risk of policy changes, risk of natural gas price fluctuations, risk of new hydrogen energy business development falling short of expectations, and risks of falling short of assumptions.