Xinao (600803): Asset-light gas source expands natural gas integration and takes it to the next city

Xinao (600803): Asset-light gas source expands natural gas integration and takes it to the next city

“Light Assets” Shares Acquisition of Chongqing LNG Liquid Plant, Natural Gas Integration Layout Next City According to financial industry reports and confirmation from us and the company, the company signed an agreement with Chongqing Fuling Energy, including: 1) The two parties jointly acquired and constructed Chongqing Longran100 GM / day capacity LNG liquid plants (14% of the company’s shares); 2) The two parties jointly set up a sales joint venture (51% of the company’s shares) to sell the LNG products of the liquid plant.

The Chongqing Long Ran project is located in the highest shale gas production base in Fuling, Chongqing. The project has a designed LNG production capacity of 22 per year (about 3).

300 million cubic meters per year), the company expects to start production in the second half of 2020.

Following the company’s plan to acquire Hong Kong Stock City’s burning leader Xinao Energy 32.

After the 80% stake, the acquisition of Chongqing Longran Project demonstrates the company’s determination to enter the integrated layout of upstream, midstream and downstream of natural gas, and maintains a “buy” rating.

The development of Dongfeng by the use of shale gas has led to the strong expansion of LNG business. At present, domestic shale gas is mainly produced in the Sichuan Basin, mainly in the Fuling, Weiyuan-Changning, and Shaotong shale gas blockchains.

The National Energy Administration stated that it will strive to achieve 30 billion cubic meters of shale gas production in 2020 (10.3 billion cubic meters in 2018) and 80-100 billion cubic meters of shale gas production in 2030.

The Chongqing Longran project is located in Fuling, Chongqing, with sufficient gas source reserves. The project has a designed LNG capacity of 22 per year (about 3).

300 million cubic meters per year), the company expects to start production in the second half of 2020.

The company’s existing Shanxi Qinshui LNG liquid plant has a production capacity of 10 mg / year (about 1).

3.4 billion m3 / year), after the completion of Chongqing Longran Project, the company’s LNG production capacity will be significantly increased to 4.

At 6.4 billion cubic meters per year, the corresponding capacity elasticity increased by 246%, the upstream gas source capacity was significantly improved, and the integrated layout was the next city.

The “asset-light” equity participation development model. The downstream resources leverage the upstream development company’s cooperation with Fuling Energy. This is a new attempt to use the company’s internal downstream advantages to open up the upstream upstream: 1) Supply side: Liling Energy willCooperation and its own resources to ensure supply; 2) Demand side: The company will have LNG liquid plant operation and technical advantages, as well as the existing layout of downstream city gas, and build sales channels.

At the same time, the company participates in upstream gas sources with an “asset-light” shareholding model (14% in the LNG liquid plant and 51% in the sales company) to leverage more upstream resources with funds. The company expects to replicate this “asset-light” model in the future., To achieve further expansion of upstream gas sources, and improve the integrated layout of natural gas upstream and downstream.

The natural gas integration layout continued to advance, maintaining the “Buy” rating. One-time accidents at the company’s Wangjiata Coal Mine affected production, which is expected to cause certain losses. We lowered the company’s EPS forecast for 2019-2021 to (not considering the consolidation of Xinao Energy) 1.



56 yuan (pre-predictor 1).



56 yuan).

The company announced that the application materials for the proposed acquisition of Xinao Energy have been approved by the China 天津夜网 Securities Regulatory Commission. We believe that the short-term impact caused by one-time events does not change the long-term value of the company.

As the company’s main business covers coal production and trade, methanol production and trade, energy engineering business, and LNG production and processing business, it has selected comparable companies in their respective industries. With reference to the 20-year average P / E10x of comparable companies, there is a potential overestimation of gas asset premiums.We give the company 11-12x target P / E for 20 years, corresponding to a target price of 13.


74 yuan / share, maintain “Buy” rating.

Risk warning: Coal and methanol prices fluctuate, and the economic downturn drags down natural gas demand.