Phoenix New Media Hong Kong stock | China Merchants (Hong Kong) issued a research report that the previous upward trend of international LNG prices has cooled. Spot natural gas prices in Port Henry and the National equilibrium Point (UK) are both down 23% and 22% from their peak in early October. In the Asian market, the decline in LNG prices has been relatively modest, with domestic LNG prices in China remaining at more than 7000 yuan per ton (down 5% from the peak, but still almost double that of a year ago). This is because China has entered the heating season and demand for LNG is strong. Nevertheless, the three state-owned oil companies have stepped up their efforts to ensure an adequate supply of natural gas this winter (a total of more than 160 billion cubic meters, up 12% from a year earlier). In particular, Petrochina Company Limited plans to lock in natural gas supply of more than 100 billion cubic meters in this year's heating season (an increase of 8.4% over the same period last year).
In November, the bank collected adjustments to non-residential gas prices in some parts of the country and found that through the upstream and downstream linkage mechanism, non-residential gas prices were on average about 16 per cent higher than their off-season prices. In view of the rising price pressure upstream, several provinces have introduced updated pro-price policies, such as Shandong (which allows urban natural gas operators to make full price adjustments for their LNG procurement costs) and Hunan (which allows urban gas operators to make price adjustments for their average procurement costs). Although the gross differential pressure will continue in the short term, the bank expects the outlook to improve as the natural gas industry spends the heating season.
The bank believes that the current weakness in the industry's share prices is overdone because of investors' concerns about rising natural gas prices and production cuts since September. The industry average mixed forward P / E ratio is 11.4 times, which is similar to the 3-year average forward P / E ratio. Preferred: Hong Kong China Gas (1083HK, target price: HK $10.2), the valuation is attractive, and moving into the photovoltaic energy business will provide another growth driver; Kunlun Energy (135HK, target price: HK $10.0) is active in mergers and acquisitions, which will strengthen its city gas business.