20171128-招商证券_香港_-中国燃气-00384.HK-A_stellar_interim_result,_Maintain_BUY_8页_1mb

报告摘要

Summary of China Gas (384 HK) Report

Core Content

China Gas (384 HK) delivered a strong interim result for FY18, significantly beating market expectations. The company's recurrent profit rose by 73% to HK$3.3bn, surpassing the analyst's estimate by 3% and the market consensus by 13%. This was driven by better-than-expected gas sales, connection rollouts, and value-added services (VAS).

The company revised its FY18 guidance upward for new connection rollouts (to 3.8mn), city gas sales volume growth (to 35% YoY), and wholesale gas volume growth (to 60% YoY). The interim dividend was increased by 60% to HK$0.08/share.

Main Points

1HFY18 Recurrent Profit: Increased by 73% to HK$3.3bn, beating market consensus by 13%.
Gas Sales Growth: Rose by 74% YoY, with city gas up 40% and wholesale gas up 155%.
New Connections: Increased by 88% YoY to 2.1mn households, including 1.4mn city and 706k rural connections.
VAS Revenue: Surged by 160% in 1HFY18, contributing significantly to earnings with stable margins.
Dividend Yield: Rose to 1.6% in FY18E, up from 1.1% in FY17.
ROE: Increased to 26.8% in FY18E, reflecting strong profitability.
Net Debt/Equity: Declined from 80.3% in 2016 to 29.4% in FY20E, indicating improved leverage.
P/E Ratio: Core P/E stood at 20.2x in FY18E, which is 0.3-SD above the five-year average.
Valuation: The DCF-target price of HK$29.00 implies a 26% upside from the current price.
Rating: The analyst maintains a BUY rating with a target price of HK$29.00.

Key Financial Highlights

Metric	2016A	2017A	2018E	2019E	2020E
Revenue (HK$mn)	29,497	31,993	41,252	52,050	63,488
Gross Profit (HK$mn)	7,214	8,377	10,714	13,480	16,509
Recurring Net Profit (HK$mn)	3,716	4,475	6,068	7,478	9,012
Core EPS (HK$)	0.75	0.91	1.14	1.41	1.69
Net Debt/Equity (%)	80.3	79.0	61.5	40.1	29.4
P/B (x)	6.3	6.4	5.5	4.6	3.6
Net Margin (Core) (%)	12.6	16.3	16.7	14.7	14.2
ROE (%)	12.5	21.6	26.8	25.9	24.6

Key Risks

Execution Risk: Potential delays in rural connection rollout.
Demand Risk: Lower-than-expected gas demand.
Cost Pass-Through: Difficulty in passing increased gas costs to end-users during the winter season.

Performance Summary

Price Performance:
- 1m: -1.5%
- 6m: +98.1%
- 12m: +116.7%
Sector Performance:
- 1m: +1.8%
- 6m: +10.9%
- 12m: +19.2%
Market Cap (HK$ mn): 114,524
Avg. Daily Volume (mn): 5.69
52-Week Range (HK$): 9.91-25.0

Strategic Focus

Rural Connections: Management raised its FY18E rural connection rollout guidance to 3.8mn households, up from 3.5mn.
Gas Supply Strategy: The company aims to convert 100% of gas supply to piped gas within one year of project commencement to avoid LNG price volatility.
LNG Challenges: Currently, 70% of rural gas supply is via piped gas and 30% via LNG, with the latter suffering from price increases and potential losses.

Earnings Drivers

Gas Sales: Strong growth due to coal-to-gas conversion and increased demand.
Connection Rollouts: Significant increase in both city and rural households.
VAS: Rapid growth, contributing to earnings with stable margins.
Cost Control: Improved efficiency in distribution and administrative expenses.

Conclusion

China Gas continues to perform well with strong growth in gas sales, new connections, and VAS, supported by better-than-expected results. The company's revised guidance and dividend increase suggest confidence in future performance. Despite some margin contraction and cost pass-through challenges, the BUY rating remains due to its solid financials, growth prospects, and attractive valuation. The target price of HK$29.00 reflects a 26% upside from current levels.