Comments on the quarterly report of Guoxin Energy (600617): the performance meets the expectation, and the optimization of gas source is expected to further improve profitability
event:
The company released the third quarter report of 2016. In the first three quarters, the company achieved a revenue of 4.633 billion yuan, a year-on-year decrease of 3.31%; The net profit attributable to the parent company was 370 million yuan, up 2.06% year on year, which was in line with Shenwan Hongyuan's expectation.
Key investment points:
The decrease in gas price led to a year-on-year decrease in revenue and an increase in gross profit margin. In November 2015, after the overall gas price decreased by 0.7 yuan/m2, the revenue growth brought by the growth of gas sales was offset, so the overall revenue declined slightly. As the stock price was raised in April 2015, the cost base was higher than the same period of the second and third quarters of this year, and the gross profit margin of the company in the first three quarters increased by 2.1 percentage points year on year.
Layout five major professional sectors and continue to promote "gasification of Shanxi". In the first year of the "13th Five Year Plan", the company will build five professional sectors, including long-distance pipelines, urban gas, liquefaction plants, gas power plants, and the construction and operation of LNG gas stations, to fully promote the development of the whole industry chain. At present, 104 of the 119 counties in the province have been gasified, and more than 80% of the cities have been gasified.
Shanxi Province encourages the exploitation of coal-bed methane, and the company's gas source continues to be optimized to improve its profitability. The company's natural gas mainly comes from PetroChina's West East Gas Transmission Line, Shaanxi Beijing Line 1, 2 and 3 trunk pipelines, with 9 gas source points. In October, Shanxi Province issued a document clearly stating that in the coal prospective planning area (reserve area) and the mining area where the coal exploration right has been obtained, but the coal mining right has not been obtained, gas mining before coal mining will be implemented to promote the development of coalbed methane. The company has built a pipeline network covering the main CBM source areas in the province, forming 8 coal-bed methane merging points. With the improvement of coal-bed methane grid connection capacity, it will help further dilute the cost of gas purchase and reduce the dependence on conventional natural gas suppliers.
Earnings forecast and investment rating: referring to the performance of the company's third quarter report, we lowered the company's net profit forecast for 16-18 years to 608, 737 and 884 million yuan (658, 796 and 945 million yuan respectively before the adjustment), corresponding EPS of 0.56, 0.68 and 0.81 yuan/share, and corresponding current valuation of 21, 17 and 14 times respectively. We believe that the natural gas price reduction in 2015 will promote the growth of gas consumption, and the "Gasification of Shanxi" plan will stimulate market demand. The company is expected to become a gas asset integration platform in Shanxi Province, and the layout of "five professional sectors" is expected to significantly improve the company's gas sales scale and maintain the "buy" rating.
