SGC(SH:601139) Guotai Junan Securities·2024-03-31 16:00Investment Rating - The investment rating for Shenzhen Gas (601139) is "Buy" with a target price of 9.86, up from the previous target of 9.42 [1][2]. Core Views - The report highlights stable profit growth and an imminent recovery in gross margins. The company reported a net profit of 1.44 billion, a year-on-year increase of 17.8% for 2023, slightly exceeding performance guidance [1][2]. - The report anticipates further recovery in gross margins due to the natural gas pricing reform in Shenzhen, which is expected to contribute approximately 260 million annually to net profit [1][2][5]. Summary by Sections Financial Performance - The company achieved a total revenue of 30.93 billion in 2023, reflecting a year-on-year growth of 2.9%. The net profit attributable to shareholders was 1.44 billion, with a slight decline in the fourth quarter [1][2][5]. - The earnings per share (EPS) for 2023 was reported at 0.50, with projections of 0.58 for 2024 and 0.65 for 2025 [1][2][5]. Market Position - Shenzhen Gas operates in the public utility sector, focusing on gas wholesale, pipeline, and bottled gas supply. The company has successfully controlled gas projects in multiple cities [2][5]. - The report notes that the company’s gross margin is expected to recover, supported by the recent adjustments in gas pricing [1][2][5]. Valuation Metrics - The company is currently valued at a PE ratio of 14.92 for 2023, with projections of 12.79 for 2024 and 11.42 for 2025 [5][6]. - The report indicates a dividend yield of 2.1% for 2023, expected to increase to 2.3% in 2024 [5][6].