|作者：||Tommy WONG,Eric SIU|
|摘要：||Report title:Gas Sector - Recovery momentum to continue in 2H20
Analyst:Tommy WONG,Eric SIU
■ HK-listed citygas operators’ 1H20 revenue/NP declined 9%/14% on average, driving recent share price weakness but likely nearing an end
■ Overall retail 2020 gas sales vol. growth guidance range: +5% to +15% yoy; Gas cost to stay low in 2H20, benefitting operators’ gas dollar margin
■ Top picks: Kunlun Energy (135 HK, BUY, TP:HKD7.6); ENN (2688 HK, BUY, TP:HKD103)
Weak gas sales recovery dampened citygas operators’ 1H20 result
1) Weak gas sales vol. growth recovery in 1H20 (average HK-listed citygas operators’ retail gas sales vol. growth: +3.4% yoy in 1H20 vs. +14.7% yoy in 1H19); 2) the decline in gas sales ASP (early execution of non-peak season citygate price in 1Q20); and 3) connection work progress delay, have caused HK-listed citygas operators’ 1H20 revenue/net profit fell c.9%/14% yoy on average. However, thanks to cheaper gas procurement cost from upstream suppliers, majority of them recorded gas dollar margin expansion (i.e. most of them saw their gas dollar margin increasing by RMB0.02/cu m to RMB0.05/cu m in comparison to 1H19).
Recovery pace is on track; anticipate M&A to provide further boost
Going forward to 2H20, the overall situation will be further improved, as most of them have already seen their gas sales vol. growth picking up. Their optimistic views can be illustrated by the majority of their 2020 full year retail gas sales growth guidance ranging between +5% and +15% yoy. Furthermore, they indicated that there would be more M&A activities in 2H20, as the COVID-19 outbreak leads to more challenging operating environment for small operators, which will accelerate market consolidation and provide further boost of their gas sales vol. growth.
Low gas procurement cost to sustain in 2H20
In terms of gas tariff in this winter, most of them believe it will be higher than the current non-peak tariff, as consumption will be at its peak level for the year. However, they believe gas procurement cost to stay low for this year, as the overall supply remains sufficient and stable. As a result, they expect full year gas dollar margin will definitely be better than that in 2019.
Maintain OVERWEIGHT; Top picks: ENN and Kunlun Energy
We reiterate ENN and Kunlun Energy as our top picks for the sector. Kunlun Energy: Its shares trade at 0.7x FY21E P/B, valuation looks attractive; awaiting its Shaanxi-Beijing transmission pipeline sales to PipeChina for further re-rating; ENN: Fast recovery in gas sales vol. yoy growth (mid-teen growth in June and July), enjoys low procurement cost from its LNG import.