Key points of investment
Incidents: In 2022, the company achieved revenue of 852 million yuan (+27.66%), net profit of 166 million yuan (+19.25%), weighted average ROE of 14.26% (+6.10pct); 2023Q1 achieved revenue of 139 million yuan (-30.77%), and net profit of -0.09 million yuan (-115.86%).
Revenue & net profit increased in 2022, and the performance of the specialty gas business was impressive, and revenue increased by 1305.83%.
The gross profit margin for 2022 was 39.76% (-2.19pct), and the net profit margin on sales was 19.70% (+1.04 pct).
By product: 1) Special gases: revenue of 258 million yuan (+1305.83%), gross profit margin of 51.90% (-31.89pct). 2) Carbon dioxide: Revenue of 245 million yuan (-18.88%), gross profit margin of 43.46% (-8.55pct). 3) Hydrogen: Revenue of 171 million yuan (+8.96%), gross profit margin 25.20% (-3.04 pct).
4) Fuel products: revenue of 148 million yuan (+3.62%), gross profit margin of 35.6% (+6.03pct).
The turnover rate increased, and the weighted average ROE increased by 6.10 pct. The company's weighted average return on net assets in 2022 rose 0.92pct to 14.36% year over year. Net operating cash flow in 2022 decreased by 26.99% to $185 million.
The company is a leading liquid carbon dioxide enterprise in China and has multiple advantages in channel customer source production capacity. 1) The exhaust recycling process binds large central enterprises with significant channel advantages. The raw gas comes from exhaust gas recovery from large-scale upstream petrochemical plants, which has both stable gas sources and cost advantages; 2) High-quality products are widely recognized by food, beverage and industrial customers. The company is a strategic supplier of Coca Cola and Pepsi in China, covering high-quality and stable customer sources for well-known food and beverage and industry customers; 3) Production capacity continues to expand and deeply expand into the Southern Market. Jieyang has a new carbon dioxide recovery plant with a deep layout in the southern region..
The specialty gas business is growing rapidly, and multiple guarantees are driving the company's new growth period. 1) Continuously fill the specialty gas categories. The Yueyang electronic specialty gas project includes high-purity carbon dioxide, helium-neon-krypton, xenon rare gases, laser blends, etc. The Yizhang project includes high-purity hydrogen chloride, hydrogen fluoride, hydrogen bromide, etc. 2) Improve the guarantee of self-sufficiency of raw materials. The 90,000 Nm3 rare gas extraction unit in Baling is scheduled to be put into operation in 2023Q2 to gradually achieve self-sufficiency in rare gas raw materials. 3) Accelerated customer certification & order volume: A number of electronic specialty gas products have been certified by ASML, Liquid Air, and CONDITIONING. In 2022 M1-9, the company's cumulative total sales of electronic specialty gas orders reached 257 million yuan, about 13 times the order amount for the full year of 2021. The rapid growth rate is driving the company's new growth period.
Profit forecast and investment rating: Considering falling rare gas prices, we lowered the company's net profit forecast for 2023-2024 from 364/507 million yuan to 245/341 million yuan. The estimated net profit to the mother in 2025 was 396 million yuan, and the growth rate of net profit to the mother in 2023-2025 was 48%/39%/16%, corresponding to 33/23/20 times PE, maintaining the “buy” rating.
Risk warning: downstream demand falls short of expectations, project development falls short of expectations, risk of market price fluctuations.