Event: The company released its 2024 quarterly report. The company achieved total revenue of 34.209 billion yuan in the first quarter of 2024, a year-on-year decrease of 0.41%; net profit to mother of 1,081 billion yuan, a year-on-year decrease of 25.80%; and core profit of 1,082 billion yuan, a decrease of 12.8% year-on-year. The company's performance was slightly lower than our expectations.

After excluding Xinao Energy's offshore gas trade, the core profit of the basic business continued to grow, and the debt structure improved. After the company divested the coal business, the core profit focus was more on the main gas business. 1Q24's core profit mainly benefited from the continued growth of the platform's gas trading business. Looking at the breakdown, the 1Q24 platform contributed 660 million yuan in trade gas, and the Zhoushan LNG terminal contributed nearly 149 million yuan. Excluding the non-basic business factors of the Hong Kong stock Xinao Energy, including LNG re-export sales, 1Q24's basic business core profit was 1,074 billion yuan, an increase of 17.8% over the previous year. By the end of the first quarter of 2024, the company's balance ratio had fallen to 55.74%, a year-on-year decrease of 5.3 percentage points, and the financial structure continued to be optimized.

Demand has recovered, and the scale of the platform's trading climate has steadily increased. Against the backdrop of falling international gas prices and a recovery in downstream demand, the country imported 1.78 million tons of LNG in 1Q24, an increase of 20.4% over the previous year. The company actively explores domestic and foreign markets, and the 1Q24 platform sells 1,213 billion meters of gas? , a year-on-year increase of 33.6%. International gas prices are gradually falling, and in the context of narrowing price spreads in re-export trade, the company is actively exploring the domestic market. The company's domestic gas sales volume in the first quarter was 833 million meters? The year-on-year increase was 95.5%, while international air volume decreased by 21.2% to 380 million meters.

Global gas prices continued to fall in 2024, and the spot price of imported natural gas remained in the $9-10/mmBTU range. The high economic efficiency of Haiqi is prominent, which is expected to continue to drive the scale of gas traded on the platform.

Retail sales have risen slightly, and I am optimistic that the sales growth rate will continue to recover. 1Q24 The company's retail sales volume is 7.237 billion meters? , up 2.7% year on year, of which industrial and commercial gas consumption increased 2.9% year over year to 5.224 billion m? The population's gas volume increased 2.5% year over year to 1,947 billion meters? Retail gas volume in 1Q23 is a high base. It is mainly due to the consolidation of power plant gas volume in the same period last year, and power plant gas sales have declined drastically since the second quarter of last year. Therefore, we judge that the company's retail gas sales growth rate will continue to recover quarterly from 2Q24. As favorable price policies continue to advance across the country, Guangdong, Fujian and other regions have issued natural gas price linkage mechanism documents or price adjustment notices, which are conducive to improving the company's profitability. By the end of March, the company's net price ratio on the residential side had reached 54%. Combined with high gross margins, industrial and commercial gas continued to pick up, and the sales structure is expected to continue to improve. We believe that the company's retail gas gross margin is expected to increase further.

The dividend plan is clear, and high dividends highlight allocation value. According to the company's dividend plan for 2023-2025 and the special dividend payment plan for the sale of Xinneng Mining, the 2024-2025 cash dividends per share will not be less than 1.03 and 1.14 yuan/share, corresponding to the closing price on April 26. The company's dividend rates can reach as low as 5.8% and 6.4%, respectively. High dividends enhance the company's long-term investment value.

Profit forecast and valuation: We maintain the company's 2024-2026 net profit of 60.90, 67.09, and 7.894 billion yuan. The current stock price corresponds to PE 9, 8, and 7 times, respectively. I am optimistic that after the large-scale implementation of LNG Changxie after 2025, the company's performance will grow steadily. Maintain a “buy” rating.

Risk warning: risk of high fluctuations in natural gas prices, retail gas sales falling short of expectations