Main points of investment:

Because of tight gas sources and traceability, the increase in gas prices is more optimistic than the market expected:

At present, only Qinghai Province has not received the documents of gas price increase, and the company's industrial and commercial gas sales in Qinghai Province account for about 28%, which is the part of the company that has not yet completed the transfer of crops. Although there is no clear timetable for the price increase in Xining, according to past experience, it can be traced back. Generally speaking, the natural gas flow meter reading will be done the day before the price increase, and some enterprises will also collect a deposit. As soon as the parity document is issued, it will be settled directly at one time according to the money that has not been collected in the range of the price. The increase of gas price in the upper reaches of Xining is lower than the national average, and the gas price of Xining wellhead does not include tax of 0.8-0.9 yuan / m3. Although some industrial enterprises do not use natural gas because of operational difficulties, but because the overall gas source is relatively tight at present, and the company has its own logistics fleet, which can be transported to some enterprises that can afford natural gas, the rise in natural gas prices has no impact on overall gas sales, and in terms of CNG prices, it is more smooth than rising in some areas, and the price increase does not affect the company's comprehensive gross profit margin.

The company's branch pipe network assets are of high quality, and the core gas business is growing strongly:

Within the scope of the company's gas project management rights, the company has been actively striving for the construction of branch lines. At present, the company has branch lines in seven provinces, and is now building the eighth Zhuzhou branch line. CNPC Zhongtai has a 51% interest and has begun to use CNG to supply gas to users. The pipeline is 50-60 km long. Because the construction of the branch pipeline is subject to the examination and approval of the upstream gas source and the provincial first-level development and reform commission, and the demand for branch line construction is in advance of design and construction, there is a problem of insufficient transportation capacity. At present, the utilization rate of the company's pipeline transportation is only 15%. Therefore, there is more room for growth in the company's regional pipeline transportation in the future, and the gas transmission to the third party will continue to increase, and the utilization rate of the company's target pipeline will reach 30% in 2016. Based on the endogenous growth of the company's existing projects, we expect the company's core gas business to maintain annual growth of 25-30%, with total gas sales reaching 8 billion square meters by 2016, of which gas sales and pipeline transportation account for half.

Update the target price to HK $1.6, the rating is highly recommended:

We believe that the impact of the Petrochina Company Limited incident has faded, and the transparency of company information disclosure will be further improved in the future. According to the company's future sales growth guidelines, we update the company's profit forecast and update the company's target price of HK $1.60, which is equivalent to 20 times PE in 2013 and 16.4 times in 2014, which is 24% higher than the current price, and the rating is highly recommended.