The current situation of the company
On October 25, Hong Kong China Gas announced that it plans to raise a total of HK $2.8 billion for smart energy business investment by issuing shares and convertible corporate bonds to strategic investors Affinity Equity Partners, one of the largest private equity firms in the Asia-Pacific region. The company said the investment accelerated the company's transformation from a traditional urban gas company to an integrated energy company with technology and innovation as its core business.
The specific form of the transaction is to issue 117 million shares of the company at HK $5.0per share, raise HK $580 million and issue RMB 1.84 billion (about HK $2.22 billion) of convertible bonds at a conversion price of HK $6.3per share. According to the company's calculation, if all convertible bonds are converted into shares, AffinityEquity Partners will hold a total of 13.3% of the company.
In addition, in order to highlight the focus of the company's future business development, the company plans to change its name to Ganghua Smart Energy Co., Ltd.
Comment
Focus on the industrial park, focusing on the layout of distributed photovoltaic: in the future, the company will focus on developing the industrial and commercial distributed photovoltaic market in the park. By 2025, the company aims to invest 58 billion yuan to provide smart energy solutions for 200 industrial parks, and the distributed photovoltaic installation will be upgraded to 15GW, with a market share of 12%. We believe that there is a great overlap between the potential customers of industrial and commercial distributed photovoltaic and the industrial and commercial city gas customers of the company's stock, and the company is expected to take advantage of the customer advantages accumulated in the past to promote the steady growth of the installed capacity of distributed photovoltaic business. of course, this also means that the company will enter the new energy business with heavy asset investment, and the scale of capital expenditure is expected to increase in the future. The company expressed confidence in the rate of return of smart energy projects, distributed industrial and commercial photovoltaic projects with high electricity prices, good profitability, the company's overall profitability is expected to continue to improve.
Valuation is attractive: the recent correction in the company's share price may be due to concerns that the domestic gas shortage is squeezing the company's gross margin, but we believe that the natural gas supply situation this winter may be better than expected. the market may overreflect the negative impact of the gas shortage on the company's urban combustion business. Looking forward, with the gradual launch of the company's distributed photovoltaic projects, we believe that the company's valuation hub may be boosted by the valuation of H-share new energy operators, and the current company valuation is more attractive.
Valuation and suggestion
We keep our earnings forecast and target price unchanged at HK $6.2m, corresponding to 11 times FY21 and 10 times FY22's price-to-earnings ratio, which is 20 per cent higher than the current share price. Maintain an industry rating that outperforms. The current share price corresponds to 9 times FY21 and 9 times FY22's earnings.
Risk.
The growth rate of gas volume is not as good as expected, the incentive plan is not as expected, and the expansion of industrial and commercial projects is not as expected.