20180125-申万宏源研究_香港_-中集安瑞科-03899.HK-Store_of_wealth_12页_971kb

CIMC Enric Holdings (3899 HK) - Summary

Core Content

This report discusses the investment recommendation and analysis for CIMC Enric Holdings (3899 HK), with a focus on the potential growth of its LNG storage equipment business driven by upcoming government policies on natural gas storage and peak regulation. The report highlights the positive outlook for the company's financial performance and stock valuation, maintaining a BUY rating.

Key Financials

Main Views and Key Information

• Policy Expectations: The report expects the central government to release detailed policies related to natural gas storage and gas peak regulating facilities before the Chinese New Year in 2018, which could significantly boost the LNG storage equipment market.
• Market Growth: Natural gas consumption in China grew by 16% in the first 11 months of 2017, with a forecast of reaching 319.4bn cm by end-2020 under a 10% annual growth assumption. The current storage capacity among gas utilities is only 5% of total supply, indicating a large gap and potential for growth.
• CIMC Enric's Position: The company is well-positioned to benefit from the increased demand for LNG storage equipment. It has a 45–50% share of the national LNG storage market, with smaller tanks (under 500cm) manufactured in-house and larger units produced on-site, giving it flexibility.
• EPS Forecast: The analyst maintains the 2017 EPS forecast at Rmb0.31, but revises the 2018 and 2019 forecasts upward to Rmb0.42 and Rmb0.51, respectively, indicating a 35.5% and 21.4% YoY growth.
• Target Price: The target price is revised from HK$6.10 to HK$10.50, representing a 32% upside from the current price.
• Investment Rationale: The company is expected to benefit from the government's push for natural gas storage infrastructure, which will increase demand for its LNG storage products. The report also highlights the coal-to-gas transformation as a key driver of natural gas consumption growth.
• Scenario Analysis: The report presents different scenarios (Bearish, Neutral, Bullish) for the company's financial performance, with the base case showing net profit growth exceeding 20% YoY for the next three years.

Investment Recommendation

• The analyst maintains a BUY rating for the company, citing the potential for significant growth in the LNG storage market due to upcoming policies and the company's strong market position.
• The target price of HK$10.50 represents a 22x 2018E P/E and 2.8x 2018E P/B, suggesting the stock is undervalued relative to its expected performance.

Conclusion

The report highlights the positive outlook for CIMC Enric Holdings due to the expected policy support, increased natural gas demand, and the company's market leadership in LNG storage equipment. The analyst believes the company will benefit significantly from these factors and recommends buying the stock with a revised target price of HK$10.50.