Introduction to this report:

Relying on CNPC's advantage of stabilizing gas sources, the company grasps the potential for natural gas consumption growth in the central and western regions. While achieving an increase in natural gas sales, the company continuously optimizes the customer structure, and uses favorable price reforms to improve the stability of gross margin.

Summary:

For the first time covered, the target price was HK$8.45, giving it an “increase in holdings” rating. The company focuses on the main natural gas sales business, relies on CNPC's stable gas source advantages, and actively optimizes the customer structure. We expect the company's EPS to be 0.76, 0.83, and 0.87 yuan respectively in 2023-2025, with growth rates of +26%, +9%, and +5%, respectively. Considering the company's resource advantages, referring to the comprehensive PE and PB valuation of comparable companies, the target price was HK$8.45, covered for the first time, and given the company a “increase in holdings” rating.

Relying on the Group's resource advantages and based on the central and western markets, the gas sales volume of the natural gas sales business has been growing steadily. The market believes that the uncertainty between supply and demand in the international gas market is high, and that rising resource costs may lead to a narrowing of the industry's gas sales price gap. At the same time, the company's continued growth in natural gas sales is challenging. However, we believe that the company's natural gas sales business will be better than market expectations, and while achieving an increase in natural gas sales volume, it can maintain a stable sales price gap. The reason is ① There is great potential for natural gas consumption growth in the central and western regions. Relying on the advantages of CNPC in stabilizing gas sources, the company is based in the Midwest, and has achieved a steady increase in gas sales volume. ② The company actively expands industrial users and continuously optimizes the customer structure. At the same time, benefiting from the opportunities of natural gas market-based reforms, the sales price difference will remain stable, and the company's competitive advantage will gradually be highlighted.

The Fujian LNG terminal construction project and value-added business expansion have opened up space for the company's long-term growth.

We believe that the company's LNG receiving station will maintain a high load rate in the second half of the year and achieve the load rate target of 90% for the whole year. Meanwhile, on August 11, 2023, the company's Fujian LNG (Phase I) project was approved by the EIA. After completion, the size of the company's LNG receiving station will increase by 6.5 million tons/year. In the future, with the expansion of the scale of the company's LNG receiving stations and the expansion of value-added business, it will open up room for the company's long-term growth.

Catalysts: Demand recovery in the domestic natural gas market is accelerating, the company's industrial user expansion process is accelerating, and the natural gas price promotion policy is fully implemented.

Risk warning: 1) Geopolitical events have exceeded expectations, and international gas prices have risen sharply. 2) The progress of natural gas market-based reforms has fallen short of expectations. 3) Project construction and progress fell short of expectations.