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Gas:Merged gas prices concurs with energy reform; CL-Buy on CR Gas

研究机构:高盛高华证券 研究员:Franklin Chow,Frank He,Marcus Chu,Shuai Liu 发布时间:2015-03-02

China met its pledge to gas reform with sooner and larger price cuts.

The National Development and Reform Commission (NDRC) announced onFeb 28 to merge non-residential inventory volume and incremental volume(on 2012 basis) gas prices to Rmb2.51/m3 effective April 1 (our forecast:2.65 on July 1). The former rises by Rmb0.04/m3 (our forecast: 0.18), whilethe latter falls by Rmb0.44/m3 (our forecast: 0.30), with a blended rate cut ofRmb0.06/m3 (our forecast: 0.08 hike). The NDRC now allows gas users withdirect supply to negotiate prices with suppliers. It seeks to eventually allowgas price to be market-based but retain control in gas transmissioncharges, subject to potential cut in further reform, in our view.

Gas still expensive vs. fuel oil; expect further price liberalization.

We expect retail gas prices to remain more expensive than competing fueloil, but oil price recovery and further liberalization through direct pricenegotiation may serve as the medium-term catalysts for gas demand.

Positive to gas distributors on sales volumes and dollar margins.

We think utilities with higher exposure to incremental gas sales volumesand greenfield projects will benefit the most from city gate price cuts interms of gas sales and dollar margin, such as CR Gas (CL-Buy), China Gas(Neutral) and ENN (Neutral). We expect about 40% of their gas sales arenow from incremental volume and estimate the above price reform to cuttheir blended procurement costs by Rmb0.10-Rmb0.12/m3. Our sensitivityanalysis shows an Rmb0.1/m3 dollar margin expansion could bring about8-17% increase of our 2015E net profit and additional 5% sales volumegrowth would lead to further 1-3% 2015E net profit rise for our covered gasutilities. We assume China’s gas demand to grow by 9% yoy in 2015E.

Less positive for oil majors due to lower blended gas prices.

Notwithstanding the positive momentum to the energy reform, loweredgas prices imply 10%/4%/3% lower ‘16E EPS for PetroChina (Buy)/Sinopec(Not Rated)/CNOOC (Neutral) (not considering potential demand recovery).

Stock picks: Buy CR Gas (CL), Kunlun Gas and PetroChina.

We reiterate CL-Buy on CR Gas as we think lower gas procurement costwould enhance its earnings in 2015, in addition to catalysts such as SG&Acost cut, turnaround of Tianjin project, and potential M&A. Despitepotential earning shortfalls for PetroChina (Buy) from lower gas prices, weexpect reduction in capex and operating costs to be positive catalysts.

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