Baichuan Energy (600681) 2018 Annual Report Comments: M & A Drives Growth Expects Upstream and Downstream Layout

Baichuan Energy (600681) 2018 Annual Report Comments: M & A Drives Growth Expects Upstream and Downstream Layout
2018 revenue growth 59.90%, net profit attributable to mother increased by 17.29%, in line with expectations. The company released its 201杭州夜生活网8 annual report with revenue of 47.53 trillion, +59 ten years ago.90%; net profit attributable to mother 10.0.6 billion, ten years +17.29%, in line with company guidelines.The company announced that it intends to distribute a cash dividend of RMB 5 (including tax) for every 10 shares, and at the same time use capital reserves to transfer capital to 4 shares. Mergers and acquisitions have become the largest growth point of performance, and regional expansion is worth looking forward to. The company’s main growth point in 2017 was the rural coal-to-gas connection in Hebei. In 2018, the main growth point was converted to urban-fired projects.The net profit of Jingzhou Gas consolidated in November 2017 was 93.01 million yuan, and the consolidated profit of Fuyang Gas consolidated in August 2018 was 55.24 million yuan.The company’s execution of M & A has been verified year after year, and its business area has expanded from a single Beijing-Tianjin-Hebei region to multiple points across the country.Cash in hand 8.91 trillion, asset-liability ratio 48.25% lower than its peers and operating cash flow +38.77% to +12.19 trillion, there is still enough room for subsequent regional expansion. The average gross profit margin of gas sales and connection is mainly affected by the gas price policy and the merger and acquisition of new projects31.55%, a big drop of 10 a year.60 pct, mainly due to the increase in the proportion of gas sales operating revenue with low gross profit margin13.97 pct to 50.62%.Gas sales income +120.87% to 24.0.6 billion, with a sales volume of 9.700 million cubic meters, mainly driven by mergers and acquisitions; gross profit margin -4.74 pct to 8.33%, mainly due to the increase in residential door prices and winter door prices in 18 years, which led to the expansion of the income denominator, and the unbalanced gross compensation was also disturbed.Connection income +26.82% to 14.39 trillion, mainly connected volume + 25% to 330,000 households; gross profit margin -5.51 pct to 72.63%, it is judged that the profit margin of the connection is lower than that of Hebei.Hebei’s overall gross profit margin was -11.02 pct to 31.35% is the region with the largest decrease, and it is judged that the upward price pressure during the winter supply period in Beijing, Tianjin, and Hebei is greater than that in other regions. It is planned to invest in the Liaoning Suizhong receiving station to build a full-industry chain gas platform. The company is actively building a full-industrial chain gas platform.It is planned to invest 3.5 billion pounds to build a LNG receiving station with a budget of 300 in Liaoning Suizhong, and the project has been listed in the “Special Plan for Liaoning Natural Gas Storage and Construction Facilities” (2018-2022), pending state approval.Five peak-shaving gas storage stations have been put into operation, and two have been put into operation to enhance peak-shaving capacity.The company continues to develop diversified energy projects, and the Halo New Network project has been put into operation. Investment suggestion: Add profit forecast for 2021 and maintain “Buy” rating. We expect the company to return to its parent’s net profit for 2019-2021.03/13.93/15.52 trillion, corresponding to a dynamic PE of 11.9x / 10.2x / 9.2 times, reasonable estimate interval 16.33-17.49 yuan.We are optimistic about the company’s execution of M & A and the layout of upstream receiving stations, maintaining the “buy” level. Risk warning: Gas demand is not up to expectations, cost increases are higher than expected, and connection volume is lower than expected