2024-05-06 04:02Investment Rating - The report maintains a neutral rating for the company, Xin Ao Energy (2688 HK), with a target price of HKD 66.30, indicating a potential downside of 1.8% from the current price of HKD 67.50 [3][9]. Core Insights - The company's operational performance shows a continued recovery trend, with retail gas volume experiencing a mild year-on-year growth of 2.7% in Q1 2024. The growth in industrial and commercial gas sales was 2.9% and 2.5%, respectively [3]. - The management has set a retail gas growth target of approximately 5% for 2024, supported by a favorable pricing ratio and expected decreases in procurement costs [3]. - LNG trading profits are expected to decrease starting in the second half of 2024, with projected profits of RMB 200 million in H1 and RMB 300 million for the entire year [3]. - The market has already priced in expectations of a bottoming out of the company's earnings, with a year-to-date stock performance of +17%, outperforming the Hang Seng Index [3]. Financial Overview - Revenue projections show a steady increase from RMB 110,051 million in 2022 to RMB 139,605 million by 2026, with a compound annual growth rate (CAGR) of approximately 7.5% [2][13]. - Net profit is expected to grow from RMB 5,865 million in 2022 to RMB 8,502 million in 2026, reflecting a CAGR of around 8.3% [2][13]. - The earnings per share (EPS) is projected to decline from RMB 7.04 in 2022 to RMB 6.08 in 2024, before recovering to RMB 7.52 by 2026 [2][13]. - The company maintains a dividend yield of approximately 3.8% in 2022, increasing to 5.4% by 2026 [2][13]. Operational Metrics - The company aims for a 20%-30% growth in its comprehensive energy business and a 10% increase in retail gas segment gross profit for 2024 [5]. - The total retail gas sales volume is projected to grow from 25,941 million cubic meters in 2022 to 28,818 million cubic meters by 2026 [5][6]. - The company plans to develop 1,200 to 1,400 million cubic meters per day of new industrial and commercial users and 1.4 to 1.6 million new residential users annually [5].