20210609-招银国际-天伦燃气-01600.HK-Introducing_Zhuhai_Port_as_strategic_investor_3页_860kb

Tian Lun Gas (1600 HK) Summary

Core Content

Tian Lun Gas (TLG) has introduced Zhuhai Port Holdings (ZHP) as a strategic investor through the transaction of 120 million existing shares at HK$7.68 by Chairman and controlling shareholder Mr. Zhang Yingcen. These shares were originally acquired from IFC in May 2021 at HK$7.50. Despite the sale, Mr. Zhang's shareholding increased to 55.96%, net of both transactions.

ZHP is a state-owned enterprise (SOE) under Zhuhai SASAC, with a focus on shipping logistics, new energy, and high-end manufacturing. It has gas distribution projects in west Zhuhai City, including Hengqin District and Zhuhai West District. ZHP has been actively expanding its clean energy business through M&A since 2020, indicating a strategic alignment with TLG's interests.

The introduction of ZHP as a strategic investor is viewed positively by the research team, as it is expected to enhance market sentiment and unlock future collaboration opportunities in clean energy sectors such as LNG import, hydrogen business, and integrated energy solutions. The research team maintains a BUY rating with a target price (TP) unchanged at HK$9.90.

Key Financial Highlights

Earnings Summary

• Revenue: RMB 6,549 mn (FY19A), RMB 6,440 mn (FY20A), RMB 7,478 mn (FY21E), RMB 8,763 mn (FY22E), RMB 10,045 mn (FY23E)
• Net Income: RMB 789 mn (FY19A), RMB 1,044 mn (FY20A), RMB 1,034 mn (FY21E), RMB 1,196 mn (FY22E), RMB 1,360 mn (FY23E)
• EPS: RMB 0.80 (FY19A), RMB 1.04 (FY20A), RMB 1.03 (FY21E), RMB 1.19 (FY22E), RMB 1.35 (FY23E)
• YoY Growth: 38.4% (FY19A), 30.8% (FY20A), -1.2% (FY21E), 15.4% (FY22E), 13.5% (FY23E)
• P/E Ratio: 8.9 (FY19A), 6.8 (FY20A), 6.9 (FY21E), 6.0 (FY22E), 5.3 (FY23E)
• P/B Ratio: 1.83 (FY19A), 1.52 (FY20A), 1.31 (FY21E), 1.14 (FY22E), 0.99 (FY23E)
• Yield: 3.3% (FY19A), 3.8% (FY20A), 4.3% (FY21E), 5.0% (FY22E), 5.7% (FY23E)
• ROE: 20.5% (FY19A), 22.3% (FY20A), 19.0% (FY21E), 19.0% (FY22E), 18.7% (FY23E)

Cash Flow Summary

• Net Cash from Operations: RMB 971 mn (FY19A), RMB 1,360 mn (FY20A), RMB 1,191 mn (FY21E), RMB 1,665 mn (FY22E), RMB 1,896 mn (FY23E)
• Net Cash from Investments: RMB -250 mn (FY19A), RMB -671 mn (FY20A), RMB -1,494 mn (FY21E), RMB -1,028 mn (FY22E), RMB -1,111 mn (FY23E)
• Net Cash from Financing: RMB -451 mn (FY19A), RMB -398 mn (FY20A), RMB -102 mn (FY21E), RMB -133 mn (FY22E), RMB -166 mn (FY23E)
• Net Change in Cash: RMB 271 mn (FY19A), RMB 291 mn (FY20A), RMB -405 mn (FY21E), RMB 503 mn (FY22E), RMB 619 mn (FY23E)

Balance Sheet Summary

• Total Equity: RMB 4,187 mn (FY19A), RMB 4,980 mn (FY20A), RMB 5,746 mn (FY21E), RMB 6,631 mn (FY22E), RMB 7,635 mn (FY23E)
• Shareholders' Equity: RMB 3,891 mn (FY19A), RMB 4,699 mn (FY20A), RMB 5,445 mn (FY21E), RMB 6,307 mn (FY22E), RMB 7,284 mn (FY23E)
• Total Debt / Equity Ratio: 124.0% (FY19A), 101.7% (FY20A), 91.4% (FY21E), 82.2% (FY22E), 74.2% (FY23E)
• Net Debt / Equity Ratio: 91.4% (FY19A), 71.8% (FY20A), 69.2% (FY21E), 54.5% (FY22E), 42.0% (FY23E)

Key Ratios

• Gross Profit Margin: 26.0% (FY19A), 27.7% (FY20A), 25.4% (FY21E), 24.8% (FY22E), 24.3% (FY23E)
• Operating Margin: 21.9% (FY19A), 26.5% (FY20A), 21.7% (FY21E), 21.0% (FY22E), 20.6% (FY23E)
• Net Margin: 12.1% (FY19A), 16.2% (FY20A), 13.8% (FY21E), 13.7% (FY22E), 13.5% (FY23E)
• ROE: 20.5% (FY19A), 22.3% (FY20A), 19.0% (FY21E), 19.0% (FY22E), 18.7% (FY23E)
• ROA: 6.6% (FY19A), 8.1% (FY20A), 7.4% (FY21E), 7.7% (FY22E), 7.9% (FY23E)
• EPS: RMB 0.80 (FY19A), RMB 1.04 (FY20A), RMB 1.03 (FY21E), RMB 1.19 (FY22E), RMB 1.35 (FY23E)
• DPS: RMB 0.23 (FY19A), RMB 0.27 (FY20A), RMB 0.31 (FY21E), RMB 0.36 (FY22E), RMB 0.40 (FY23E)
• BVPS: RMB 3.89 (FY19A), RMB 4.68 (FY20A), RMB 5.41 (FY21E), RMB 6.26 (FY22E), RMB 7.21 (FY23E)

Market Performance

• Current Price: HK$8.57
• Target Price (TP): HK$9.90 (unchanged)
• Up/Downside: +15.5%
• Share Performance (12-mth): 46.2% absolute, 25.9% relative
• Market Cap: HK$8,601 mn
• Avg 3 mths t/o: HK$13.1 mn
• 52w High/Low: HK$8.85 / HK$5.47

Analyst View

• Maintain BUY rating with TP unchanged at HK$9.90
• The research team believes the introduction of ZHP will likely boost market sentiment and trigger further re-rating
• TLG's share price has surged ~13% in the past month, suggesting a shift in investor focus towards smaller names due to rich valuations of leading players
• TLG is currently trading at 6.9x FY21E PER, still lagging behind peers

Strategic Implications

• ZHP's SOE background and focus on clean energy suggest a strong strategic alignment with TLG
• Potential for future collaboration in LNG import, hydrogen, and integrated energy business
• ZHP's active M&A in clean energy since 2020 may open new avenues for growth
• The transaction is expected to enhance TLG's market position and attract further investment

Key Points

• Shareholding Structure:
  • Tianlun Group: 46.9%
  • Free float: 28.0%
• Current Ratio: 1.2 (FY19A), 1.0 (FY20A), 1.1 (FY21E), 1.2 (FY22E), 1.3 (FY23E)
• Quick Ratio: 0.5 (FY19A), 0.4 (FY20A), 5.6 (FY21E), 0.5 (FY22E), 9.2 (FY23E)
• Debtors Turnover Days: 83.9 (FY19A), 83.4 (FY20A), 71.6 (FY21E), 69.6 (FY22E), 70.3 (FY23E)
• Share Performance:
  • 1-mth: +10.2%
  • 3-mth: +20.7%
  • 6-mth: +33.9%
  • 12-mth: +46.2%

Risk & Disclaimer

• The report contains general information and does not constitute investment advice
• Investors are advised to consult with a professional financial advisor
• CMBIS may have investment banking relationships with the companies discussed
• There are potential conflicts of interest that may affect the objectivity of the report
• The report is for the use of intended recipients only and may not be reproduced or distributed without prior consent