2013 profit of HK $401 million, in line with expectations:

Revenue during the period was HK $6.44 billion, up 34 per cent from a year earlier (excluding LPG business), while profits attributable to shareholders were HK $401 million, up 9.8 per cent from a year earlier. Excluding one-time gains and losses, earnings and earnings attributable to shareholders for the year were HK $956 million and HK $420 million respectively, up 41 per cent and 35 per cent respectively over the same period last year, with basic earnings per share of HK8.142 cents and dividend per share of HK0.72 cents. The company's performance mainly benefited from the growth of the core gas business. In addition to the 16% increase in gas sales, the company's connecting revenue reached HK $1.04 billion during the period, doubling the year-on-year growth and making a significant contribution to the company's profits. Overall, the company's performance is in line with management growth guidelines and our expectations.

The share of connection revenue has increased significantly:

In 2013, the company added about 150000 new residential users, with a total of 675000 residential users, 5500 industrial and commercial users, more than 10, 000 new users in Jiangxi, Qinghai, Shandong, Jiangsu and other provinces, and more than 30, 000 new users in Hubei. In the past, the proportion of company connection fee revenue was about 9%, but it rose to about 16% in 2013. It is expected that the connection revenue will continue in 2014, accounting for the same proportion as in 2013.

The unraised price in Qinghai is expected to be compensated in 2014:

In the second half of 2013, the company completed all prices except Qinghai, with an average price increase of about 0.22 yuan for non-resident users, an increase of 10%. In the second half of 2013, the sales volume of non-resident users in Qinghai was 400m square meters, and the average cost per party increased by 0.145 yuan, affecting profits of about HK $30 million. If the smooth price is completed successfully in 2014, it will bring positive compensation contribution to profits, and Qinghai Province's gas sales accounted for 49.5% of the total gas sales in 2013. once the price in Qinghai Province is straightened out, it will be beneficial to the company's future business expansion in Qinghai Province. so as to improve the overall profitability of the company.

Sales increased by 25-30% in 2014, with good growth:

In 2013, the company sold 2.247 billion cubic meters of gas, an increase of 16 percent over the same period last year. Pipe gas delivery and transport gas volume were 377 million cubic meters and 124 million cubic meters respectively. In the company's gas sales structure, residential gas sales account for 22%, industrial and commercial and other customers account for 61%, and gas station sales account for 17%. Gas sales are expected to grow by 25-30% in 2014, and the gas sales structure will always remain stable.

Highly recommended rating with a target price of HK $1.76:

We update the company's earnings forecast and give the target price HK $1.76, which is equivalent to 17 and 13 times PE in 2014 and 2015, with 33% room for improvement over the current price, which is highly recommended.