Since September, the stock price has hit record highs on many trading days. The current stock price has more than doubled from the price in June. What is driving such a rise in Zhongyu Gas (03633)?
In the energy, oil and gas field, investors will focus more on larger companies, such as China Few investors will pay attention to companies such as China National Gas (00384), ENN Energy (02688), China Resources Gas (01193), Kunlun Energy (00135), and Beijing Enterprises (00392) as medium-sized urban gas suppliers. Yu Gas (03633).
Since the second half of 2017, the gas sector has experienced two waves of gains. Recently, the sector has been rising for nearly a month. However, Zhongyu Gas has ignored the adjustment and has been rising since June, showing a 90-degree growth offensive. Especially since Zhongyu Gas (03633) released a profit announcement on July 31 that its interim net profit more than doubled, its stock price has been on the rise.
Zhitong Finance APP found that in the three months of continuous rise, Zhongyu’s stock price was surprisingly stable. After the stock price reached 3 Hong Kong dollars, it went sideways for nearly a month. After October, it rose rapidly again, and after reaching 4 Hong Kong dollars, Another month of sideways trading. It finally broke out on November 9, rising 8.64% that day and strongly breaking through the 4 Hong Kong dollar platform.
Entering November, natural gas winter supply guarantee has officially begun. Recently, China and the United States have signed a number of natural gas cooperation agreements. Can the natural gas sector continue to rise?
It is reported that China Gas holds approximately 44% of the shares of Zhongyu Gas , is the largest shareholder, but the business focus of the two companies is different and there may not necessarily be great competition.
Benefit from the national energy policy + North China's "coal to gas" policy
Data disclosed by the National Development and Reform Commission show that from January to September, the national natural gas output was 108.8 billion m³, a year-on-year increase of 10.8%; natural gas import volume was 64.4 billion m³, an increase of 26.5%; natural gas consumption 167.7 billion m³, a year-on-year increase of 18.4%. With the advancement of coal-to-gas conversion, national natural gas consumption continues to grow at a high rate. The Beijing section of the Fourth Shaanxi-Beijing Line was completed at the end of October, with an annual gas transmission capacity of 25 billion m³. The burning of loose coal will be banned in Beijing and surrounding areas starting this winter, and the new gas pipelines will help increase the demand for natural gas consumption in the Beijing-Tianjin-Hebei region due to the conversion of coal to gas.
In terms of policy, China has reduced the benchmark gate price of non-residential natural gas by RMB 0.1 per thousand cubic meters since September 1, and requires natural gas production and operation enterprises to reduce the gate price of natural gas supplies in various places by the same amount in principle.
It is worth noting that in September this year, Zhongyu Gas predicted that the gas demand of industrial and commercial customers would increase after the domestic non-residential natural gas price dropped. Coupled with the economic recovery, it believed that the most difficult time for the natural gas industry has passed. The company Expansion into distributed energy business has been considered. Since then, the company's beautiful performance released on August 25 also proved that its performance has reached an inflection point.
Entering November, the winter supply guarantee of natural gas has officially begun. Due to the severe natural gas supply situation this year, in order to ensure supply and promote market-based trading of natural gas prices, PetroChina recently announced that it will start a new round of natural gas bidding transactions at the Shanghai Natural Gas Trading Center. At the same time, PetroChina also issued a document stating that market-based pricing will be implemented for the increment of natural gas this winter and next spring.
In addition, during the Trump imitation period last week, Chinese and American companies signed a total of 34 cooperation projects, with a total amount of US$253.5 billion. Among them, the National Energy Investment Group will invest US$83.7 billion in shale gas, power and chemical production projects in West Virginia, USA, becoming one of the highlights of this Sino-U.S. cooperation. This time, China and the United States signed a number of natural gas cooperation agreements, providing an additional layer of guarantee for natural gas sources. Domestic natural gas consumption continues to grow, and the prosperity of the natural gas industry will continue to improve.
Obviously, the supply situation is severe, and the market-based pricing of natural gas will increase the profits of relevant gas companies, and the performance in the second half of the year may be further released.
Net profit increased sharply while the debt ratio remained high.
Zhongyu Gas (03633) achieved a turnover of approximately HK$2.142 billion in the mid-term of 2017, an increase of 30.7% year-on-year. The gross profit was approximately HK$503 million, an increase of 11.5% year-on-year. The profit attributable to the owners of the company was Profit was approximately HK$148 million, a year-on-year increase of 127.1%.In terms of
's main business, pipeline natural gas sales volume was 585 million cubic meters, a significant increase of 57% compared with the same period in 2016, and automobile natural gas sales volume increased by 9% year-on-year. Net cash generated from operating activities in the first half of 2017 was HK$235 million, an increase of 32.7% from HK$177 million in the same period last year, reflecting that the profitability of the company's main business is fairly good. At first glance,
's performance seems to be perfect, but EBITDA in the first half of this year was HK$486 million, an increase of only 22.5% compared to HK$397 million in the same period last year. Compared with the 30.7% year-on-year growth in revenue in the first half of the year, it reflects that the company's operating efficiency is average. .
It is worth noting that compared with last year, the company benefited from a net exchange gain of approximately HK$44.97 million in the first half of this year, compared with a net loss of HK$59.34 million in the same period last year.
In addition, in the first half of this year, the company's financing costs were as high as HK$102 million, compared with HK$59.15 million in the same period last year, a year-on-year increase of approximately 72.4%. As a result, the company's gross profit margin in the first half of this year fell by 4% compared with the same period last year. As shown in the figure below, since 2015, Zhongyu Gas's asset-liability ratio has continued to remain above 70%. After
completed the increase in its equity stake in Harmony Gas to 100% in July, it announced that it would make every effort to develop Harmony Gas's industrial-focused projects in Hebei and Jiangsu.
Data source: Wind Information
It can be seen that, taking into account the exchange gains in the first half of the year and the soaring financing costs, Zhongyu Gas's performance is not perfect.
The valuation is no longer low. Do you have expectations for the stock price?
Zhongyu Gas currently has a static price-to-earnings ratio of 55 times and a mid-term net profit of HK$148 million. Based on a gross estimate, the profit in the second half of the year will not be lower than the mid-term profit. The full-year profit is calculated at HK$300 million. Corresponding to a PE of 37 times in 2017, and based on the current average price-to-earnings ratio of 20 times for gas stocks listed on Hong Kong stocks, its valuation is not low.
Given that Zhongyu Gas operates 56 gas projects in Henan, Hebei, Jiangsu, Shandong, Jilin, Fujian, Heilongjiang, Zhejiang and Anhui, it will also look for more merger and acquisition opportunities in the future. As long as the policy direction remains unchanged, high growth can be expected in the future.
However, in the Hong Kong stock market, whether the stock price can fully reflect the company's value depends largely on whether the major shareholders and management have enough motivation to maintain the stock price.
But at present, apart from the reversal of performance, Zhongyu Gas has taken few actions in terms of increasing dividends, company buybacks, and executives increasing their holdings. Whether the stock price can rise strongly remains to be seen by the market.
As of the close of trading on November 13, Zhongyu Gas (03633) closed up 2.25% at HK$4.55.
