20150316-大和证券-Upgrading__return_to_growth_18页_415kb

报告摘要

China Resources Gas (1193 HK) Summary

Core Content

China Resources Gas (CR Gas) is a leading city-gas distributor in China, with a focus on economically developed and densely populated cities. The company is currently upgrading its investment rating from Hold to Outperform, based on several positive developments that are expected to improve its financial performance and stock valuation.

Main Points

M&A Activity: CR Gas has refocused on M&A, with the addition of Qingdao city, addressing concerns that M&A activity had slowed following the departure of its former chairman. In 1Q15, the company secured 25 city-gas projects for a total investment of approximately CNY1.6bn.
Tianjin JV: The Tianjin joint venture (JV) has seen its issues receding, including a loss in 1H14 and concerns over the city-gate tariff hike. The full tariff hike pass-through is expected to minimize the loss in 2014 and contribute over HKD100m in associate earnings for 2015. If the Binhai New Area (BNA) asset transfer goes through in 2015, it will boost sales volume for the Tianjin JV.
City-Gate Tariff Adjustments: The recent city-gate tariff cut (from CNY2.96/m3 to CNY2.52/m3) is expected to lead to a resumption of gas sales volume growth. If oil prices remain weak, an additional 10% cut by 3Q15 could further support growth.
Earnings Outlook: The company is forecasting a 14% increase in gas sales volume for 2015, up from the previous 11% forecast. This includes contributions from the Qingdao project, which is expected to add 2.7 percentage points to the growth. The 2015-16E EPS is revised up by 8.5-10%, driven by the Qingdao JV and reduced margin pressure.
Valuation: The stock is currently trading at 15x 2015E PER, near the midpoint of its China peers' range of 12-17x. The 12-month DCF-based target price is revised to HKD23.0, which is equivalent to 16.6x 2015E PER, aligning with the stock's past-6-year average.
Share Price Performance: The stock had a 12-month range of 17.94-26.75 as of 16 Mar, with a market cap of USD5.87bn and an average daily turnover of USD8.86m.

Key Financial Highlights

Metric	2014E (HKDm)	2015E (HKDm)	2016E (HKDm)
Revenue	28,095	33,181	38,967
Net Profit	2,515	3,082	3,697
Core EPS (fully-diluted)	1.131	1.386	1.662
EPS Change (%)	13.6	22.5	20.0
PER (x)	18.1	14.8	12.3
Dividend Yield (%)	0.9	1.2	1.6
DPS (HKD)	0.194	0.251	0.318
PBR (x)	2.8	2.4	2.1
EV/EBITDA (x)	13.4	11.7	10.0
ROE (%)	16.5	17.6	18.2

Key Assumptions

Metric	2014E	2015E	2016E
Natural Gas Sales Volume (mn m3)	13,170	15,018	16,773
Gas ASP, incl tax (HKD/m3)	3.62	3.95	4.20
Gas Purchase Cost, incl tax (HKD/m3)	2.77	3.10	3.35

Key Ratios

Metric	2014E (%)	2015E (%)	2016E (%)
Net Profit Margin	9.0	9.3	9.5
ROE	16.5	17.6	18.2
ROIC	12.1	12.2	12.6
Net Debt to Equity	37.4	41.1	33.6
Free Cash Flow Yield	0.7	3.9	6.5

M&A Activity (2008-2015)

Year	External Acquisition Investment (HKDm)	Asset Injection Consideration (HKDm)	Total Investment (HKDm)	Total City-Gas Projects Acquired	Total City-Gas Projects
2008	-	3,800	3,800	7	7
2009	260	1,600	1,860	20	27
2010	3,056	2,000	5,056	21	48
2011	647	1,710	2,357	25	73
2012	4,553	2,415	6,968	78	151
2013	3,836	-	3,836	25	176
2014	1,958	-	1,958	29	205
1Q15	1,622	-	1,622	25	230

Qingdao Project Details

Stake Acquired: 49%
Total Consideration: CNY612.5m
2014 Gas Sales Volume: 400mcm
2014 Net Profit: CNY50m
Residential Penetration: 70%
2014 Net Profit Margin: 3.8%
Targeted 2018 Gas Sales Volume: 800mcm
Targeted 2018 Net Profit Margin: 7%

Conclusion

The company is expected to benefit from the resolution of key challenges, including the Tianjin JV's performance and M&A activity, leading to a rerating of its stock. The revised target price of HKD23.0 reflects a more optimistic outlook on earnings and valuation, with a projected 14% growth in gas sales for 2015 and a 22.5% increase in core EPS. The company's focus on M&A and the potential asset transfer of BNA to the Tianjin JV are key drivers of this positive outlook.

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