Cinda Securities(SH:601059) 智通财经网·2025-11-06 08:48Core Viewpoint - The heating industry in China, primarily relying on coal-fired combined heat and power, is expected to see a trend of price increases, leading to potential profit recovery for heating companies [1][2]. Industry Overview - The heating industry is a typical public utility sector, with a steady growth in centralized heating area from 2010 to 2023, achieving a compound annual growth rate (CAGR) of 7.8%, with residential area accounting for 76% [2]. - Coal-fired heating accounts for over 70% of the heating methods, with hot water being the main medium, suitable for urban residents and public buildings, comprising nearly 85% [2]. - The historical reform of heating prices in China exceeds twenty years, with recent policies aiming to deepen price reforms and accelerate metering modifications [2]. Profitability Factors - Profitability of residential heating companies varies significantly, influenced by pricing and cost control [3]. - In terms of pricing, Beijing has the highest unit heating price in the country, benefiting companies like Jinfang Energy and Jingneng Heating [3]. - Fuel costs constitute about 60% of total heating costs, making fuel cost control crucial for profitability [3]. - Companies like Lianmei Holdings have demonstrated strong cost control by using low-value lignite and optimizing transportation and storage, achieving a gross margin of 24% in 2024, while others like Huitian Thermal Power reported a negative margin of -13.8% [3]. Cash Flow Characteristics - Heating companies generally have strong cash flow due to pre-collection of heating fees, with four out of five selected companies showing contract liabilities accounting for about 40% of total revenue and positive free cash flow [4]. Related Companies - Lianmei Holdings (600167.SH): High level of refined management with a consistent gross margin above 20%, cash flow from net profit close to 200% in 2024, indicating strong dividend capability [5]. - Jingneng Heating (002893.SZ): Supported by Beijing State-owned Assets Supervision and Administration Commission, with a gross margin between 15%-20% and a 40% dividend payout ratio in 2024 [5]. - Jinfang Energy (001210.SZ): Stable profitability in the range of 20%-25% for heating, with a cash collection ratio of 101% in 2024 [5]. - Hatou Co., Ltd. (600864.SH): Backed by Harbin State-owned Assets, expected to see profit improvement with upcoming price reforms after a decade without adjustments [5].