华创证券表示，截止2024年3月15日，燃气Ⅲ(申万)指数PE(TTM)仅为16.89，位于2021年以来12%分位点处，燃气行业估值或有较大修复空间，在顺价及成本趋稳等售气毛差改善预期下，城燃行业估值或有望提升。The Zhitong Finance App learned that recently, there has been frequent news of utility price increases, and water, electricity and gas prices have been adjusted in many parts of the country. Furthermore, the four high-speed rail fares of the Wuhan-Guangzhou High-Speed Rail, Shanghai-Hangzhou Passenger Railway, Shanghai-Kunming Passenger Railway, and Hangzhou-Ningbo Passenger Railway will open the price increase window in June, with an increase of about 19% to 20%. At the same time, the utility index has surged by more than 12% since this year.
In terms of water prices, according to incomplete statistics from CITIC Securities, 24 municipal cities (regions) have adjusted tap water prices since 2022, and water price adjustments are continuing to advance. Among them, after entering 2024, the two major cities of Shanghai and Guangzhou have successively introduced water price adjustment plans. The continuous advancement of water supply price policy adjustments will help improve the pain point where industry returns have continued to be low over the years, and reduce the industry's dependence on government subsidies.
On the gas side, at the beginning of 2023, the Development and Reform Commission issued a “Letter on the Status of Providing Upstream and Downstream Price Linkage Mechanisms for Natural Gas” to all provinces and cities, treating natural gas price linkage matters as key tasks. Since 2023, many provinces and cities have optimized the upstream and downstream price linkage mechanisms for natural gas, and relaxed the price linkage conditions to a certain extent. With the steady implementation of the residents' gas price promotion work, the average price increase of the first tier since 2023 is about 0.259 yuan/square meter (+9.76%, incomplete statistics).
Huachuang Securities said that as of March 15, 2024, the gas III (Shenwan) index PE (TTM) was only 16.89, at the 12% quartile since 2021. The valuation of the gas industry may have a lot of room for repair. The valuation of the gas industry may be expected to increase under expectations of improvements in gross gas sales, such as stable prices and costs.
In terms of high-speed rail, the official website of China Railway 12306 issued four price adjustment announcements: Starting June 15, passenger fares will be adjusted for the four high-speed rail lines of the Wuhan-Guangzhou High-Speed Rail, Shanghai-Hangzhou Passenger Railway, Shanghai-Kunming Passenger Railway, and Hangzhou-Ningbo Passenger Railway. Shen Wan Hongyuan pointed out that the marketization of high-speed rail fares is an important step for the rapid development of China's high-speed rail industry; taking the Hangzhou-Ningbo passenger special price adjustment plan as an example, the price announced for second-class seats increased by about 20% compared to the current fare; the high-speed rail fare marketization mechanism has been gradually improved to benefit high-speed rail operators and companies with high-speed rail line assets.
In terms of electricity prices, Huatai Securities previously stated that in 2019, the average residential electricity price in the 35 OECD countries that can obtain public data was 1.53 times the industrial electricity price; China's resident/industry ratio was 0.85 times, ranking second to last among 36 countries. According to the bank's estimates, for every 1 cent/degree of increase in residential electricity prices and the reduction of cross-subsidies, industrial and commercial electricity costs can be reduced by at least 3 pcs/degree.
Regarding the increase in utility and high-speed rail prices, Huachuang Securities said, first, price adjustments for utilities and high-speed rail are nothing new. The market is paying a lot of attention to recent price adjustments, mainly due to the current low inflation in China. Second, utility and high-speed rail price adjustments have a relatively small impact on inflation. Price adjustments for utilities and high-speed rail are mainly aimed at residents, and the two have a relatively low weight in CPI. Even according to the strong assumption that the country is generally rising, if the prices of hydropower, fuel and high-speed rail both rise by 5%/10%, the total impact on CPI will be 0.26/0.52 percentage points. Finally, adjustments to government pricing such as utilities and high-speed rail should not be considered from the perspective of “raising” prices, but should be understood from the perspective of deepening the reform of the price mechanism and optimizing the financial resources of local governments.
From a valuation perspective, the utility sector is generally undervalued. The overall valuation is 19.22 times higher, below 24% of the historical percentile. Of the individual stocks, 55 have a valuation of less than 20 times, and the price-earnings ratio of more than 20 stocks, such as Funeng Shares, Ningbo Energy, and Shenneng Shares, is less than 15 times.
From a dividend rate perspective, judging from the dividend ratio, individual stocks such as Guangxi Energy (rights protection), Guoxin Energy, and Guiguan Electric Power had dividend rates of over 100% last year, while 20 shares, such as Blue Sky Gas, Construction Investment Energy, and Oriental Huanyu, had dividend rates of over 50%. In terms of dividend ratios, 20 stocks including Baichuan Energy, Blue Sky Gas, Foran Energy, and Baoshenan Energy had dividend ratios of more than 3% last year.
Huatai Securities previously stated that domestic CPI/PPI is not high in the short term, and the bank believes that utilities may usher in a flexible adjustment window on the residential side. According to the bank's estimates, electricity/water/gas bills account for less than 2% of residents' disposable income in 2022, especially gas and water bills. It is recommended to focus on water and gas. From June 2006 to January 2022, the compound growth rate of China's residents' water costs was 2.3%, and the compound growth rate of sewage treatment costs was 4.4%. According to the 3-5 year cycle of cost monitoring, the water price increase window period occurred. By the end of 2021, the proportion of disposable income in 36 key cities of China's water bills was between 0.21% and 0.67%, far below what water users can afford (1.5%-3%).
Zheshang Securities believes that the rise in utility and high-speed rail fares is currently in the early stages. As China's economy enters a new development model, utility companies may gradually transition to marketization in the future, and prices may continue to rise. Zheshang Securities said that dividend stocks represented by utilities may experience a systematic increase in valuation. Since the overall price elasticity of this type of industry is less, consumption may be relatively less affected by price increases, and the price increase logic may become a new support for dividend assets beyond “high dividends.”
Related concept stocks:
Guangshen Railway Co., Ltd. (00525): Guangshen Railway Company mainly engages in railway passenger and cargo transportation business, cooperates with Hong Kong Railway Co., Ltd. to operate direct transit passenger train services, and provides railway operation services to other domestic railway companies. In recent years, the Guangshen Railway Company has been committed to transforming high-speed rail operators, from the transformation of its own infrastructure assets to the “upgrading” of passenger transport products, in an effort to increase the revenue share of the high-speed rail passenger transport sector.
China Water (00855): The company is an investment holding company mainly engaged in urban water supply management and construction. The company operates through three divisions. The Urban Water Supply Management and Construction Division is engaged in providing water supply management and construction services. Currently, the Group operates in more than 40 counties and cities in mainland China. The comprehensive water treatment capacity is nearly 6 million tons per day.
Beijing Holdings Water Group (00371): Beijing Enterprises Water Group is a Hong Kong investment holding company mainly engaged in water services. The company operates through three divisions. The Sewage and Reclaimed Water Treatment and Construction Services Division is engaged in the construction and operation of sewage and reclaimed water treatment plants, the construction of seawater desalination plants and the provision of construction services for comprehensive treatment projects. The water supply service department is engaged in the distribution and sale of tap water and the provision of related services.
Xinao Energy (02688): The current growth focus has changed to non-LNG trading business. Among them, Pan-Energy's business revenue increased by 32.5% to 14.513 billion yuan, and gross profit accounted for 13.2% of the company's total gross profit. The “Pan-Energy Microgrid” model was launched to integrate source network storage, involving various fields such as clean energy, distributed energy storage, and intelligent services; Smart Home's business revenue was 3.702 billion yuan, up 18.9% year on year, gross profit reached 2,517 billion yuan, an increase of 21.1% year on year, and the cost side showed an improvement trend, thanks to the accumulation of high-viscosity customer base in the urban fuel industry.
Kunlun Energy (00135): As of June 30, 2023, 89.2% of the company's LPG upstream resources came from CNPC, the majority shareholder. The company's main revenue sources are natural gas sales business (accounting for about 80%) and LPG sales business. Although it also has LNG processing, storage and transportation, exploration and production operations. The former currently has two receiving stations in Tangshan and Jiangsu, while the latter explores and exploits crude oil and natural gas in the Republic of Kazakhstan, the Sultanate of Oman, etc., but the revenue scale of the two is still small.
