China Gas Sector : Need to be selective on margins

类型：行业研究机构：大和证券(香港)有限公司研究员：Dennis Ip,Cindy Li 日期：2014-09-03

What we recommend

    Towngas China (1083 HK,HKD8.34, Buy [1]) remains as ourtop sector pick given its gas salesgrowth is focussed on non-Sichuanprovinces (Sichuan is a legacy service province with low unit dollarmargins). In 1H14, TCCL’s unitdollar margin rose by 8% YoY fromHKD0.29/m3 to HKD0.31/m3.

    We also like Beijing EnterprisesHoldings (392 HK, HKD65.95,Outperform [2]) given its distributedgas sales margin is defensive, withover 70% of volume attributed togas-fired power and heatcogeneration, for which the naturalgas cost was effectively passedthrough by the Beijing government.

    However, the transmission tariff cutof its 40%-owned Shaanxi-Beijingpipelines could be a near-termoverhang on its share price.

    Both TCCL and BEH are currentlytrading at 13x 2015E PERs, whichare cheaper than peers’ 16-23x.

    How we differ

    We see the margin squeeze issue as away of distinguishing theoutperformers among the city-gasoperators.