CHINA GAS HOLD(HK:00384) Changjiang Securities·2025-03-20 11:13Investment Rating - The investment rating for the company is "Buy" [9] Core Views - The company is one of the largest urban gas companies in China, transitioning from rapid expansion to a stable operating phase, with a consistent dividend amount of HKD 2.72 billion over the past two years and a dividend yield of approximately 7% [2][4] - Benefiting from residential gas pricing adjustments and a decrease in upstream procurement costs, the company's gross margin is expected to recover; the contribution from gas connection projects has reached a low point, and it is anticipated that earnings per share (EPS) will resume growth starting from the fiscal year 2024/25 [2][4] - The current price-to-book (PB) and price-to-earnings (PE) valuations are still low, indicating potential for value re-evaluation [2][4] Summary by Sections Company Overview - The company is a leading integrated energy supply and service enterprise in China, with a market capitalization that has grown from approximately HKD 4 billion in early 2009 to HKD 36.8 billion by the end of 2024, reflecting an annualized growth rate of about 14.8% over 16 years [4][13] Sales Volume - In the fiscal year 2023, the total gas sales volume reached 41.7 billion cubic meters, with compound annual growth rates of 11.1% and 17.9% over the past five and ten years, respectively [5][40] - The market share of the company in China's natural gas consumption has increased from 4.9% in the 2014/15 fiscal year to 10.6% in the 2023/24 fiscal year [5][40] Sales Price - As of October 2024, approximately 62% of residential gas sales have been adjusted to market prices, with residential gas prices increasing from HKD 2.71 per cubic meter in 2022 to HKD 2.97 per cubic meter in 2023 [6][40] - The gross margin has gradually recovered, reaching HKD 0.50 per cubic meter in the 2023/24 fiscal year, with expectations to improve further in the following years [6][40] Connection Projects - The number of residential connections peaked at 5.43 million in the 2019/20 fiscal year but has been declining since then, with projections of 1.26 million, 1.12 million, and 0.98 million connections for the fiscal years 2024/25 to 2026/27 [7][40] Value-Added Services - The company’s value-added services achieved an operating profit of HKD 1.58 billion in the 2023/24 fiscal year, accounting for 23.6% of total revenue, with a year-on-year growth of 5.7% [8][40] - The company plans to spin off its value-added service platform, which is expected to enhance penetration rates significantly [8][40] Financial Analysis - The company is projected to achieve revenues of HKD 80.25 billion, HKD 79.74 billion, and HKD 79.76 billion for the fiscal years 2024/25 to 2026/27, with net profits of HKD 3.64 billion, HKD 4.19 billion, and HKD 4.71 billion, respectively [8][40]