20130918-美银美林-Long_term_structural_growth_story_for_NGV_continues_41页_2mb

报告摘要

Summary of Long Term Structural Growth Story for NGV in China

Core Content

The document outlines the long-term structural growth story for natural gas vehicles (NGVs) in China, emphasizing the role of policy support, environmental benefits, and cost advantages. It also provides insights into the valuation and market dynamics of key players in the natural gas distribution sector.

Main Points

1. NGV Demand Growth

NGVs are expected to see secular demand growth due to environmental regulations and cost efficiency.
The State Council is raising fuel standards for gasoline and diesel, which could make NGVs more competitive.
NGV deployment is projected to account for 9.0–10.7% of China’s gas consumption by 2015, with 2.0–2.5 million units.
LNGVs are expected to grow significantly, from 71,000 units in 2012 to 250,000–300,000 units by 2015, with a CAGR of 52–62%.

2. Environmental Benefits of NGVs

NGVs significantly reduce particle emissions (PM2.5) by 90%, nitrogen oxides by 20–40%, and carbon emissions by 15–20%.
They produce almost no sulfur emissions, making them a cleaner alternative to diesel and gasoline vehicles.

3. Gas Price Reform and Market Concerns

The gas price reform of 10 July 2013 introduced a two-tier pricing system, raising concerns about the competitiveness of LNG.
Despite a 100% cost pass-through, LNG end-user price remains at a 28% discount to diesel, maintaining its cost advantage.
LNG price discounts are estimated to range from 28% to 36% post-reform, depending on scenarios.

4. Policies Supporting NGV Development

The State Council and NDRC have implemented policies to promote NGV adoption.
The "Air Pollution Prevention and Action Plan" (2013) supports new energy vehicles, including NGVs.
The "Natural Gas Usage Policy" (2012) highlights NGV deployment as a priority.
The 12th Five-Year Plan includes special funds for transportation energy and emissions reduction.

5. LNGV Payback Period

The payback period for LNG engine OEM or conversion is estimated to be within 2.5 years, and even within 30 months under certain scenarios.
With sufficient LNG refueling stations, fleet owners are more likely to adopt LNGVs.

6. Key Players in the NGV Market

Kunlun Energy (135 HK) is identified as the leading beneficiary, with 291 LNG stations and 210 CNG stations as of 2012.
ENN Energy (2688 HK) is also a strong contender, targeting 500 LNG stations by 2015.
The pecking order of companies in the NGV sector is: ENN Energy > Kunlun Energy > CR Gas > Beijing Enterprises > HKCG > China Gas.

7. Valuation Metrics

Valuation table compares P/E, P/B, EV/EBITDA, and ROE of major gas distributors.
Kunlun Energy has the lowest P/E and P/B ratios, indicating strong value.
ENN Energy and Beijing Enterprises also show attractive valuations.

8. LNG Feedstock Price Adjustments

The LNG feedstock price in Shaanxi and Inner Mongolia increased by RMB0.4/cm.
This led to market concerns about the viability of LNG processing plants, but profitability remains intact with a margin of RMB0.7/cm.

9. LNG Oversupply Concerns

China has 26.4 mcm/day of LNG liquefying capacity, with 43.3 mcm/day under construction.
This could lead to oversupply by 2015, but NGVs are a key driver for LNG demand.

Key Information

NGV adoption is expected to grow rapidly, driven by environmental and economic factors.
LNG price remains 28–36% cheaper than diesel post-reform.
Fuel price increase from tightening standards could further enhance NGV competitiveness.
Kunlun Energy and ENN Energy are highlighted as top beneficiaries due to their extensive LNG refueling station networks.
LNGV payback periods are favorable, encouraging fleet operators to switch from diesel to LNG.
Valuation of NGV-related companies is strong, with Kunlun Energy leading in terms of P/E and P/B ratios.
Policy support and emissions reduction goals are central to the NGV growth story in China.

Conclusion

The NGV market in China is poised for long-term structural growth due to favorable policy support, environmental benefits, and cost efficiency. Despite some market concerns about gas price reform, LNG remains competitive with a discount of 28–36% to diesel. Companies like Kunlun Energy and ENN Energy are well-positioned to benefit from this growth due to their strong infrastructure and strategic positioning.