HANGYANG LIMITED(SZ:002430) SINOLINK SECURITIES·2024-11-06 10:21Investment Rating - The report assigns a "Buy" rating for the company, marking its first coverage [1]. Core Views - The company is expanding from being an air separation equipment expert into the industrial gas sector, showing strong cash flow. In the first half of 2024, gas revenue accounted for 60% of total revenue, up from 9% in 2010 [1]. - The company's net profit for the first three quarters of 2024 is expected to decline by 21% due to falling gas prices and equipment order structure, but is anticipated to improve in 2025 with a recovery in manufacturing demand [1]. - Retail gas prices are expected to rebound as manufacturing demand recovers, with liquid oxygen and nitrogen prices having risen by 20% and 14% respectively from their lowest points earlier in the year [1]. - The penetration rate of third-party onsite gas production is expected to increase, with the company significantly growing its contracted onsite gas projects since 2019 [1]. - The company is diversifying its operations, having signed supply agreements with emerging industry clients and made strategic investments to enhance its electronic gas supply capabilities [1]. Summary by Sections Investment Logic - The company is transitioning into the industrial gas business, with gas sales growing significantly since its IPO [1]. - The recovery of manufacturing demand is expected to positively impact gas prices and profitability [1]. - The company has seen a substantial increase in its contracted onsite gas production capacity, which is projected to continue contributing to revenue growth [1]. Profit Forecast, Valuation, and Rating - The forecasted net profits for 2024, 2025, and 2026 are 960 million, 1.247 billion, and 1.552 billion RMB respectively, with corresponding EPS of 0.975, 1.267, and 1.578 RMB [3]. - The company is valued at a target price of 31.68 RMB based on a 25x PE ratio for 2025 [1].