投资之家-股票-港股-美股-三板-研报-行业-概念

加为桌面|设为首页|收藏本站|意见建议

行业研究

全部

China Gas Distribution:NDRC announces non-residential citygate price hike

研究机构:香港上海汇丰 研究员:Jenny Cosgrove,Gloria Ho 发布时间:2014-08-17

4 Average hike in the base year volume price of RMB0.4/cm,effective 1 September 20144

Short-term negative for city gas operators before passthrough,but long-term impact minimal as we believe fullpass-through can be achieved4

We have an OW rating on ENN Energy (TP HKD66.50), N onBeijing Enterprises (TP HKD74.0), N on Towngas China Co(TP HKD10.10), and UW on CR Gas (TP HKD24.1)

The NDRC has just announced the long-awaited natural gas non-residential citygateprice hike. Key details are as follows: a) average hike in base year volume price:RMB0.4/cm; b) effective date: 1 September 2014; c) excludes use of gas in fertilizermanufacturing; d) no change to residential citygate price.

Other details of the NDRC policy: a) the policy states that local government subsidiescan be given to gas-fuelled taxis, and city / rural buses; b) for district heating companiesin certain provinces in the West of China, or experiencing operational difficulties,preferential pricing should be offered.

Impact:

1) Negative for city gas operators in the short term as it will take time to pass through theincrease in gas costs to end-users. Based on the experience of 2013, it will take c4-5months to achieve full pass-through.

(a) As investors are typically uncertain until full pass-through can be confirmed, wewould not be surprised to see some pressure on the share prices of the city gas operators inthe short term.

(b) For some projects, retrospective increases in end-user prices were not allowed even if,ultimately, full pass-through is achieved – which means that there will be a few months ofmargin squeeze.

(c) City gas operators may not seek to fully pass-through the increase in costs to CNGrefuelling stations as they want to boost gas sales volume growth. So the margin for someof the CNG stations may be slightly lower after the hike.

3) In the longer term, we believe the impact will be minimal because:

(a) We believe full pass-through can ultimately be achieved within half a year.

(b) CNG vehicle refuelling business is the highest margin business (> RMB1.0/cm vs gas sales to thecommercial and industrial segment at cRMB0.7-0.8/cm) and will remain so even with a bit of marginsqueeze at/in some of the stations / provinces.

Valuation. The only OW we have in the China Gas Distribution space right now is ENN Energy (2688HK, OW, HKD60.10, TP HKD66.50). We have an N rating on Beijing Enterprises (392 HK, HKD71.95,TP HKD74.0), N on Towngas China Co Ltd (1083 HK, HKD9.12, TP HKD10.10) and UW on ChinaResources Gas (1193 HK, HKD26.75,TP HKD24.1).

We continue to like ENN Energy as a) it operates mostly in the prosperous areas of China, such as Jiangsuand Shandong, which ensures volume growth as price elasticity is lower when incomes are higher,enabling the company to pass through citygate price hikes; b) the company has sound strategies in vehiclegas development, with CNG being a short-term story and LNG one of long-term growth; and c) thecompany has lower exposure to the residential segment than its peers.

Our target price for ENN Energy of HKD66.50 is based on the average of a PE valuation of HKD64.30 pershare (25.0x FY14e PE based on 1x FY14e-16e PEG), a FY14e PB valuation of HKD46.60 per share(based on an ROE-implied FY14e PB of 3.6x), and a DCF valuation of HKD88.60 per share (WACC of6.9%, risk-free rate of 3.5%, equity risk premium of 6.0% and beta of 0.67).

Potential catalysts: M&A activities, availability of gas allowing higher growth, and improvement in theutilisation of existing gas pipelines.

Key downside risks: a decline in industrial volumes with slowing GDP and citygate gas price increasesthat cannot be passed through to customers.

声明:投资之家免费提供的研究报告及其他资料均来自互联网,仅作为用户获取信息之目的,并不构成投资建议,市场有风险,投资需谨慎。