CHINA RES GAS(01193) 广发证券·2025-01-23 03:14Investment Rating - The report assigns a "Buy" rating to the company with a current price of HKD 26.75 and a target value of HKD 34.20 [4][248]. Core Insights - The company is a leading urban gas provider in China, with a strong focus on city gas operations and a significant market share, achieving a compound annual growth rate (CAGR) of 25% in gas sales from 2008 to 2023 [9][39]. - The company is expected to benefit from the recovery of LNG prices and the implementation of pricing policies that will enhance profitability [9][248]. - The report highlights the company's robust financial health, with a return on equity (ROE) consistently above 10% and a dividend payout ratio increasing to 50.3% in 2023, indicating strong shareholder returns [9][94]. Summary by Sections 1. Company Overview - The company is backed by China Resources Group and has been deeply involved in the urban gas sector for over 20 years, ranking among the top three in gas sales nationwide [21][23]. - As of 2024H1, the company operates 276 urban gas projects across 25 provinces, with a coverage of 97.08 million users [31][39]. 2. Pricing and Profitability - The company has seen a recovery in profitability due to the stabilization of gas prices and the implementation of a pricing mechanism that aligns sales prices with procurement costs [9][160]. - The average selling price of gas in 2023 was HKD 3.50 per cubic meter, with a gross margin of HKD 0.51 per cubic meter, showing improvement from previous years [160][248]. 3. Business Segments - Gas sales accounted for 82% of total revenue in 2023, with a significant contribution from the connection business, which, despite its smaller share, has a high profit margin [55][241]. - The comprehensive service segment has been growing rapidly, with revenues reaching HKD 40.45 billion in 2023, driven by kitchen and heating services [202][204]. 4. Financial Projections - The company is projected to achieve net profits of HKD 50 billion, HKD 57 billion, and HKD 63 billion for the years 2024 to 2026, respectively, with corresponding earnings per share (EPS) of HKD 2.17, HKD 2.44, and HKD 2.73 [9][243]. - The report anticipates a gradual recovery in gross margins, with expected improvements in the gas sales segment due to favorable pricing policies [239][240]. 5. Market Dynamics - The urban gas market in China is expected to continue growing, driven by increasing urbanization and the demand for cleaner energy sources [97][106]. - The company is well-positioned to capitalize on these trends, with a strategic focus on expanding its service offerings and enhancing customer engagement through innovative service models [207][212].