金宏气体(688106)In 1H22, Jinhong's revenue and profit growth both exceeded expectations.Top-line growth beat expectations on the back of the high volume growthof main products and the consolidation of acquirees at the end of last year.Bottom-line growth exceeded expectations mainly thanks to the grossprofit margin (GPM) recovery and the results of cost control. During thereporting period, the Company steadily proceeded with its vertical andhorizontal strategy. With the continuous development of the electronicbulk gas and total gas management (TGM) business, the prototype of adomestic comprehensive gas leader has emerged. We continue torecommend Jinhong Gas as a top pick for boasting both α and βattributes: on the one hand, as a leading private gas company, Jinhong ispoised to fully benefit from industry-wide growth; on the other hand,strong competitive advantages endow itself with a strong α. We reiterateour 2022E/23E/24E net profit estimates, corresponding to diluted EPSestimates of Rmb0.56/0.75/0.97 after factoring in the equity incentive and36x/27x/21x PE at the current price. We reiterate our target price of Rmb33along with the “BUY” rating.1H22 earnings overview:Jinhong released the 2022 interim report. During the reporting period, Jinhongrecorded operating revenue of Rmb930mn (+19.41% YoY), of which specialtygas revenue increased by 32% YoY, and bulk gas revenue increased by 12%YoY; it registered attributable net profit (ANP) of Rmb98mn (+13.28% YoY),equivalent to EPS of Rmb0.20, and ex-one-off ANP of Rmb82mn (+20.55%YoY). According to our calculation, Jinhong achieved operating revenue ofRmb484mn (+13.35% YoY), ANP of Rmb60mn (+23.24% YoY), andex-one-off ANP of Rmb53mn (+45.02% YoY) in 2Q22 alone.Top-line growth beat on the back of the high volume growth of mainproducts and the consolidation of acquirees at the end of last year.In 2Q22, Covid flare-ups in Shanghai greatly disrupted the flow of logistics andpeople. Despite the fact that East China contributes a large proportion of theCompany's revenue (the East China region's revenue accounted for morethan 70% of the total revenue in 2021), the Company's revenue in 1H22 stillachieved nearly 20% growth, exceeding market expectations, mainlyattributed to 1) the high volume growth of main products which boostedrevenue growth: taking hydrogen as an example, the Zhangjiagang hydrogenproject was gradually put into operation in 2H21 and basically reached fullproduction in 1H22; 2) the consolidation of acquirees: acquirees that started tobe consolidated last year contributed about Rmb171mn in revenue during thereporting period, accounting for 18.44% of the total.Bottom-line growth exceeded expectations as a result of a rebound inNPM thanks to the GPM recovery and the results of cost control.1) The smooth progress of price hikes and the lower cost of raw materialsdrove a significant rebound in GPM: The GPM in 1H22 was 34.90%, anincrease of 2.98ppts compared to 1H21; the GPM in 2Q22 was 36.65%, anincrease of 3.64ppts compared with 1Q22, mainly due to the smooth progressof the Company's price hikes and the lower cost of raw materials. 2) Theresults of cost control emerged: In 2021, in order to expand the bulk electronicgas business, Jinhong introduced external sales and management talents,leading to a rapid increase in the expense ratio. Since 1H22, Jinhong hasstepped up cost control, and the results have already been seen. The threeexpense ratios decreased by 0.99ppts in 2Q22 from 1Q22, especially theselling and administrative expense ratios. In this context, the Company's netprofit margin (NPM) rebounded significantly, coming in at 11.35% in 1H22,close to that in 1H21, and 13.15% in 2Q22, 1ppt higher than that in 2Q21, andthe rebound in NPM drove its profit to grow beyond market expectations.The vertical and horizontal strategy was steadily underway, and theprototype of a domestic comprehensive gas leader has emerged.Jinhong adheres to the strategy of vertical and horizontal development. Underthe influence of the pandemic in 1H22, the strategy remains well underway.Jinhong established a number of subsidiaries to further improve the rollout andconstruction of multiple production bases, such as Quanjiao JinhongElectronic Materials (disilane, trimethylsilamine), Solar Green Energy (waterelectrolysis hydrogen production equipment), etc. After years of efforts, theprototype of the domestic comprehensive gas leader has emerged: 1) As faras product varieties are concerned, there are currently abundant gas varieties(100+), which can better meet the diversified gas demand of downstreamusers. 2) Electronic bulk gas and the TGM business continued to develop,pushing comprehensive service capabilities to reach a new level. In addition tothe electronic bulk gas order from SMIC at the end of 2021, it has successivelywon bids for electronic bulk gas orders from Guangdong XinyuenengSemiconductor and Guangdong Guangda Electronics this year. Recently,Jinhong signed a TGM service contract with SK Hynix Semiconductor,marking the first IC semiconductor customer for its TGM business. Jinhong'sprogress in semiconductor, which entails the most stringent gas qualityrequirements, demonstrates its comprehensive gas service capabilities.Jinhong appears highly attractive now in our view.1) The worst time is over: With the reopening of Shanghai and thenormalization of production, the impact of Covid-19 has basically subsided. 2)The inflection point in the management and selling expense ratios may havealready emerged: After expenses climbed in 1Q22, Jinhong attached greatimportance to expense control, and the expense ratio decreased in 2Q22compared with 1Q22, and the results of expense control have shown. Weexpect that the expense ratio may further decline with the recovery of revenuegrowth in 3Q22. 3) Jinhong keeps abreast of the integration progress of M&Atargets: As a gas leader with a flexible mechanism and sophisticatedgovernance, the Company has intensified its integration efforts after theconsolidation of acquirees last year missed expectations, and we expect thatthe profitability of the consolidated targets may become on par with theCompany within the year. 4) The valuation may have hit bottom: TheCompany is currently trading at less than 30x 2023E PE, which is not only atthe lowest level in history but also at a low level among gas leaders, thuspresenting extremely high investment value.Optimistic about the gas leader with significant competitive advantagesand a clear long-term growth pathIndustrial gas is a quality segment with broad headroom for development,strong profitability, offensive and defensive advantages and greatopportunities to easily form an oligopoly. We think Jinhong presents stronggrowth visibility benefiting from 1) a horizontal presence that facilitates marketshare expansion and accelerates geographic coverage, 2) a client basebacked by various vertical industries for meeting the comprehensive gasdemand of downstream customers, and 3) accelerated import substitution.Compared with its competitors, Jinhong not only has differentiated competitiveadvantages in products but also a relative edge in business model, profitabilityand position along the value chain, which warrants a strong α.Potential risks:Slower macroeconomic growth weighing on the retail business; acquireeshaving hidden problems in operation or safety of production; high goodwillassociated with its future M&A-driven growth path; the impact of Covid-19beating expectations.Investment recommendation:At this point, we continue to recommend Jinhong Gas as a top pick forboasting both α and β attributes: on the one hand, as a leading private gascompany, Jinhong is poised to fully benefit from industry-wide growth; on theother hand, strong competitive advantages endow itself with a strong α. Wereiterate our 2022E/23E/24E net profit estimates, corresponding to dilutedEPS estimates of Rmb0.56/0.75/0.97 after factoring in the equity incentive and35.6x/26.7x/20.5x PE at the current price. Comprehensively considering theCompany's growth prospects, high earnings visibility, the \strategic value\" inimport substitution and the valuation level of gas companies at home andabroad
2022年半年报营业收入9.30亿元，同比增长+19.41%；归母净利润9846.21万元，同比增长+13.28%