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Public company info - Zhongyu Energy Holdings Limited , 03633.HK
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Zhongyu Energy Holdings Limited, 03633.HK - Company Profile
Chairman Wang Wenliang
Share Issued (share) 2,645,000,000
Par Currency Hong Kong Dollar
Par Value 0.01
Industry Gas Supply
Corporate Profile Business Summary: the Group is principally engaged in (i) the investment, operation and management of city gas pipeline infrastructure, and the distribution of piped gas to residential, industrial and commercial users; and (ii) the operation of CNG/LNG vehicle filling stations in the PRC. Performance for the year: During the Year, the Group recorded a turnover of HK$8,143.8 million, representing a growth of 6.8% yoy (2018: HK$7,627.1 million). The growth in turnover was mainly driven by the increase in both sales volume of piped gas and average selling price of natural gas. However, due to slowdown of new gas pipeline construction and connection which segment enjoys the highest gross margin, the overall gross profit of the Group decreased from HK$2,221.9 million in 2018 to HK$1,909.9 million, with gross profit margin of 23.5% (2018: 29.1%). Profit attributable to owners of the Company dropped by 30.7% to HK$430.1 million as compared to HK$620.7 million in 2018. Basic earnings per share and net assets per share amounted to HK16.93 cents and HK$1.81 respectively (2018: HK24.52 cents; HK$1.55). Business Review According to the latest data released by the National Bureau of Statistics of China, China’s economic growth in 2019 was 6.1%. The apparent natural gas consumption of the PRC in 2019 amounted to approximately 302.5 billion m3 , representing an increase of 9% yoy according to the National Development and Reform Commission of the People’s Republic of China. The demand for natural gas still managed to grow at a fast pace amid the economic slowdown in the PRC. Such favorable operating environment allowed the Group to achieve a few milestones during the Year. The Group’s three major business segments, namely the sales of gas, gas pipeline construction and connection, and the sales of stoves and other services, contributed 71.3%, 19.4% and 5.1% of the Group’s turnover in 2019, respectively. The sales of gas continued to be the largest contributor of the Group in 2019, achieving HK$5,805,421,000 in sales with 19.2% yoy growth. The business was mainly fueled by the increase in the number of overall customers. This is testament to the success of the Group’s client diversification strategy between residential, industrial and commercial customers. Industrial and commercial users, especially those strong market players with high gas usage, will continue to be the Group’s core focus in this segment. Following the Group’s efforts in the past years, the penetration of gas connection in its covered area has reached a relatively high level. Accordingly, the Group has been more selective and cautious in acquiring new customers for gas connection to maintain a good level of profitability, cash flow and account receivables. For the Year, the total number of new piped gas connections amounted to 451,149 customers. As the Group continued to expand its coverage, the Group’s total existing intermediate and main pipelines increased from 14,928 km to 23,318 km, representing a 56.2% increase in length. The value-added services provided under “Zhongyu Phoenix” have been an effective channel for the Group to capitalize the full potential of its large pool of residential customers, differentiate itself with customized solutions, as well as increase customer stickiness. During the Year, the Group has placed additional resources to strengthen its retail brand by expanding product portfolio and promote greater brand recognition. This segment’s turnover recorded a 166.3% yoy increase, from HK$154.9 million in 2018 to HK$412.3 million in 2019. The growth was driven by the good market reception of the Group’s increased variety of product and services offerings, including sales of gas stoves, gas cooking appliances, wall hung boilers and insurance services. The Group sees enormous potentials to explore the market leveraging on the existing residential customer portfolio. The Group has been actively expanding over the years. In 2019, the Group has successfully obtained the exclusive concession rights of 8 new gas projects in Henan, Hebei and Heilongjiang. Together with the Group’s existing presence, these acquisitions further enhanced the Group’s foothold in those provinces. The new projects are also expected to create greater synergies with nearby operations and make financial contributions to the Group. By seizing opportunities arising from the government’s determination to control air pollution and the deepening of energy reform in the PRC, the Group also strived to expand its natural gas sales and accelerated its development of smart energy and decentralized energy businesses based on customers’ diversified energy needs, in particular industrial users with heavy energy consumption. During the Year, the Group signed a number of new projects and completed construction of certain decentralized energy projects, including charging piles for electric vehicles. The Group believes that smart energy and decentralized energy business not only would diversify the Group’s revenue sources, but would also be an important business module of its integrated energy service. Prospects: At the beginning of 2020, in the face of the spread of novel coronavirus epidemic, epidemic prevention measures were adopted throughout the country, such as extending Chinese New Year holiday, strictly controlling road traffic, delaying the resumption of work in factories, suspending businesses and closing tourist attractions, and adopting community closed management. This has had a serious impact on the domestic manufacturing production, industrial and commercial activities and consumption. As an integrated energy service provider, the Group’s business has inevitably been under pressure in a certain extent. During the outbreak, the Group has taken all feasible measures to ensure the health and safety of the Group’s employees and made every effort to reduce the impact of the epidemic. As the epidemic has been coming under control throughout the country, work and production have been gradually resumed in provinces and cities. The Group believes that the impact of the novel coronavirus epidemic is temporary and remain optimistic about the long-term prospects of the gas industry. In the long run, the PRC government remains determined to speed up the restructuring of the national energy structure, build a clean, low-carbon and efficient energy system through promoting the use of clean energy for heating and imposing restrictions on the use of coal. The establishment of China Oil & Gas Piping Network Corporation in Beijing in late 2019 forms an “X+1+X” structure in the natural gas industry. With vigorous and continuous advancement in the reform of national energy system, the setup of the China Oil & Gas Piping Network Corporation is expected to promote multi-entities and multi-channel supply of upstream oil and gas resources, a unified pipeline network in the midstream, and to open up flexible and efficient downstream market. Coupled with the completion and ventilation of the first phase of The China-Russia natural gas pipeline, it is expected that China’s natural gas demand will continue to grow in the next few years with abundant supply and more affordable costs. In view of this, the Group will capture these opportunities by implementing the following key strategies in the coming year: (i)To continue to expand the scale of its piped gas business and achieve greater economies of scale The strong demand for natural gas from industrial, commercial and residential users is expected to persist in 2020. The Group will deepen its penetration in covered areas and focus on exploring M&A targets with proximity to gas sources, healthy financials, and potential to create good synergy with existing businesses to bring in more values. (ii)To actively develop new markets and seek new sources of income In order to meet the increasing demand for personalized energy solutions and diversified services, it is necessary for the Group to be innovative in providing value-added solutions. For the residential market, the Group will continue to enrich its gas related services and products under “Zhongyu Phoenix”, strengthen its retail sales channels, make good use of online sales platforms, and thus increasing the stickiness of its residential users and capitalizing the large customer base. In terms of industrial and commercial markets, the Group will vigorously promote smart energy solutions to enterprises and local governments to address their increasing needs in achieving environmental-friendly operations, emission reduction, enhancement of energy efficiency, as well as optimization of energy structure in the community. Riding on the ongoing reform of the national energy system, the Group will keep a close eye on the opportunities arising in the supply chain and will react promptly and strive to becoming one of the most valuable and competitive integrated smart energy service providers in the PRC.

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