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China Gas Utilities:Shocking gas demand deceleration in April

研究机构:德意志银行 研究员:Michael Tong 发布时间:2015-05-22

April gas consumption in China down by 5.9% yoy

According to the preliminary data release from the NDRC, China’s apparent natural gas (NG) demand in April dropped by 5.9% yoy to 12.7bcm. This is the first decline since the data is available and worsened further from the 4.8% yoy growth in 1Q15, despite the fact that the city-gate gas tariff adjustment has taken effect since 1 April. In 1-4M15, accumulated NG demand was up 2.4% yoy (vs. 8.1% in 1-4M14). We show the demand growth table in sidebar.

Major gas distributors: YTD gas sales falling below guidance

The weak nationwide demand is also reflected from the below-expectation volume growth of city gas distributors. Major players including ENN Energy, CR Gas, Beijing Enterprises and China Gas attended our dbAccess Asia Conference 2015 this week. Three of them recognized that YTD sales/transmission volume growth has fallen below their full-year guidance (China Gas is in silent period and didn’t disclose its operating data).

ENN achieved 10-15% gas sales volume growth (ex. wholesale gas) in 1Q15 (full-year guidance: 15-20%), though management still refrains from sharing the April data. The company noted that gas demand looks even more challenging than last year, due to the weak economic activities and reduced pricing competitiveness of gas.

CR Gas achieved c.10% yoy growth in gas sales volume in 1Q15, while the April figure was less satisfactory at 6% despite the tariff adjustment from 1 April (full-year guidance: 10% organic growth). Specifically, industrial demand growth weakened further, to 5% yoy in 1Q15 (vs. the 6.6% recorded in 2014).

For Beijing Enterprises, transmission volume only recorded high single-digit growth in 1-4M15, much lower than the earlier guidance of 15-20% and implied a c.5% demand growth from ex-Beijing regions. Distribution volume remains robust on its unique positioning in Beijing.

Stay cautious under increasing volume risk in 2015

Though the sluggish data has led to rising speculation of a further gas tariff cut in late 2015, we believe it is still too early to turn positive on gas names. Under weak macro outlook/industry activities, demand recovery could be limited and delayed, suggesting a high chance that gas distributors might miss their full-year volume guidance. In addition, growth in connection income is facing headwinds, given a continued slowdown in residential property new starts (1- 4M15 down 20% yoy) - though this could be more apparent in FY16 due to buffer from existing unconnected household.

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