Guoxin Securities·2024-08-21 12:41Investment Rating - The report assigns an "Outperform" rating to the company for the first time [3]. Core Views - The company is the largest city gas operator in China, with a retail natural gas sales volume of 38.78 billion cubic meters in 2023, leading among the top five city gas companies [1][9]. - The average sales price of natural gas is expected to recover due to the implementation of a pricing mechanism that aligns with market prices, which will improve profitability [1][21]. - The demand for natural gas is anticipated to grow continuously, driven by the "dual carbon" policy and urbanization trends [1][18]. - The company is projected to achieve revenue growth of 5% to 8% from 2024 to 2026, with net profit increasing by 8% to 9% during the same period [1][26]. Summary by Sections Company Overview - The company operates in 25 provinces with 276 projects, covering three municipalities and 15 provincial capitals [1][9]. - The gas sales volume structure shows that industrial gas accounts for 51.9%, residential gas for 24.3%, and commercial gas for 21.2% [1][18]. Financial Performance - In 2023, the company achieved an operating revenue of 101.27 billion HKD, a year-on-year increase of 7.35% [26]. - The net profit attributable to shareholders was 5.22 billion HKD, reflecting a growth of 10.36% compared to the previous year [26]. - The average sales price of gas was 3.50 HKD per cubic meter, with a gross margin of 0.51 HKD per cubic meter [21][26]. Market Dynamics - The international natural gas market is expected to stabilize, leading to lower gas prices, which will benefit both city gas companies and end-users [1][18]. - The implementation of a price linkage mechanism for residential gas is expected to alleviate the price inversion issue and improve profit margins for city gas companies [1][21]. Future Outlook - The company is expected to maintain a stable growth trajectory, with projected revenues of 106.73 billion HKD in 2024, 115.28 billion HKD in 2025, and 122.48 billion HKD in 2026 [26]. - The estimated reasonable valuation for the company is between 30.23 and 31.69 HKD, indicating a premium of 9% to 14% over the current stock price [1][3].