首次覆盖，目 标价 37.05 港元，给予“增持”评级。我们预计公司2024~2026 年EPS 2.47/2.75/3.00 港元。结合相对估值与绝对估值，我们给予公司目标价37.05 港元，对应2024 年15 倍 PE；首次覆盖，给予“增持”评级。Introduction to this report:
Benefiting from factors such as profit restructuring, increased operating cash flow, and a slowdown in capital expenditure, the company's profit grew steadily, free cash flow improved, DPS entered an upward channel, and dividend value increased.
Key points of investment:
For the first coverage, the target price was HK$37.05, giving it an “gain” rating. We expect the company's 2024-2026 EPS to HK$2.47/2.75/3.00. Combining the relative valuation with the absolute valuation, we gave the company a target price of HK$37.05, corresponding to 15 times PE in 2024; the first coverage gave it an “increase in weight” rating.
Free cash flow improved, and DPS opened an upward channel. The market believes that the era of high company profits is over, and the certainty of DPS growth is weak. We believe that after experiencing the stress test in 2022, the company, as an urban fuel leader, actively optimizes its business structure to ensure steady profit growth; in addition, benefiting from the increase in operating cash flow combined with the slowdown in capital expenditure, the company's free cash flow continues to improve, and the company's DPS is expected to open an upward channel.
Unique information and logic: 1) The volume and price of the retail gas sales business has risen sharply, and the efficiency of capital operation has improved: a) The company's gas sales volume is highly resilient, and the gas sales volume is expected to continue to grow as “coal-to-gas” and “bottle conversion” advance. b) Facilitative prices drive down compounding costs, and the company's gross margin can be expected to be fixed: the company's residents account for the same industry in terms of energy, and it is expected that they will enjoy more favorable price dividends.
Furthermore, with the optimization of the gas source structure, the company's medium- to long-term procurement costs are expected to decline. c) The company's working capital management increased significantly: in 2023, the cash flow contributed by the company's advance receipts and trade accounts receivable was positive, and the difference between the number of trade accounts receivable turnover days and the advance accounts receivable turnover days converged.
2) “Double integration” hedging the decline in connection profits: the company's contract liabilities are at a high level, and the resource pool guarantees connection space; the “double integration” business is expected to partially hedge the decline in connection profits, improving the sustainability of profits and operating cash flow. 3) The pace of capital expenditure is slowing down, and dividends are expected to increase: the current competitive pattern in the urban combustion industry is relatively stable. Potential urban fuel targets comparable to the company's stock projects are limited, and subsequent acquisition expenses are expected to be at a low level; the high point of recurring capital expenditure has passed. The company's 1H24 mid-term dividend payment has shown an upward trend. Referring to Hong Kong's Zhonghua Gas, the company's DPS space is considerable. Against the backdrop of declining market interest rates, the value of the company's dividend is worth looking forward to.
Catalysts: Improved gross margin, higher dividend payments, lower market interest rates.
Risk warning: retail gas volume fell short of expectations; upstream gas prices rose above expectations; natural gas flow fell short of expectations; and the number of new connected users fell short of expectations.
