Revenue declined slightly, and the divestiture of Xinneng Mining focused on the main natural gas industry. In 2023, the company's revenue was 143.862 billion yuan (-6.70%), mainly due to falling gas prices, a decline in platform trading gas and wholesale gas revenue, and divestment of the coal business; realized net profit of 7.091 billion yuan, up 21.34% year on year; core profit of 6.378 billion yuan, up 5.12% year on year; net profit without return to mother was 2,459 billion yuan, down 47.35% year on year. The main reason for the decline in the company's net profit after deducting methanol and stabilized olefin assets and changes in the fair value of derivative financial instruments; the main reason for the large difference before and after deduction was that the sale of Xinneng Mining confirmed investment income of 4.277 billion yuan.

The Changxie resource pool has been rapidly expanded to ensure that gas sales continue to grow. In 2023, the company signed a new LNG long-term cooperation contract of 2.8 million tons/year, and the cumulative long-term cooperation volume has exceeded 10 million tons/year. In 2023, the company's total gas sales volume was 38.671 billion square meters, up 6.8% year on year. Among them, the platform traded 5,050 billion square meters, up 44.0% year on year; retail gas volume was 25.144 billion square meters, down 3.1% year on year; and wholesale gas volume was 8.477 billion square meters, up 25.5% year on year.

With the gradual release of the newly signed LNG from the Changxie Association in 2025, the company's natural gas supply capacity will be further enhanced.

Natural gas prices have declined, and downstream urban fuel prices have helped fix the gross margin. In 2023, the global natural gas market gradually returned to a normal range, and international and domestic gas prices declined. In 2023, the average sales price of gas traded on the company's platform was 2.11, 2.76, and 3.44 yuan/square meter, respectively. The purchase prices were 1.73, 3.29, and 2.42 yuan/square meter, respectively. The average gross margin for natural gas was 0.31 yuan, which was 0.09 yuan/square meter narrower than the previous year. Since the National Development and Reform Commission issued the “Guiding Opinions on Establishing and Improving the Upstream and Downstream Price Linkage Mechanism for Natural Gas” in June 2023, many places have successively introduced new gas price linkage policies. It is expected that urban fuel smooth prices will continue to advance in 2024, improving the profitability of the urban combustion business.

The absolute dividend promise guarantees the level of dividends and highlights the value of the investment. The company promises an annual increase of no less than 0.15 yuan/share in cash dividends for the next three years and a special dividend for part of the net proceeds from the sale of Xinneng Mining. The company paid 0.91 yuan per share in 2023, corresponding to a dividend rate of about 5.4% in 2023. The company is expected to pay no less than $1.03/1.14 per share in 2024 and 2025.

Risk warning: Fluctuating gas prices, demand falling short of expectations, policy changes.

Investment advice: Lower profit forecasts and maintain a “buy” rating. Considering the combined impact of factors such as falling global natural gas prices and reduced gross margin in platform trading, the profit forecast was lowered. The company's net profit for 2024-2026 is expected to be 65.0/72.3/8.14 billion yuan respectively (the original 2024/2025 was 76.0/8.18 billion yuan, with an additional 2026 forecast), a year-on-year growth rate of -8/11/13%; earnings per share are 2.10/2.33/2.63 yuan. The current stock price corresponds to PE 9.3/8.3/7.4x, respectively. Referring to comparable companies, the company was given 10-11 times PE. The equity value of the corresponding company was 651-71.6 billion yuan, corresponding to a reasonable price of 20.97-23.07 yuan/share. There is 8%-19% premium space compared to the current stock price, maintaining a “buy” rating