Q1 The performance was resilient, and the trading momentum of domestic platforms increased. Maintain a “buy” rating

The company released its 2024 quarterly report. 2024Q1 achieved operating income of 34.23 billion yuan, -0.4% year on year; realized net profit of 1.08 billion yuan, -25.8%; realized net profit of 90 million yuan without return to mother, +7.5% year over year; realized core profit of 1.08 billion yuan, -12.9% year on year. The company's main natural gas sales grew steadily in the first quarter of 2024, and the domestic business volume of the platform trading gas increased significantly. Considering that natural gas prices are low, we lowered our profit forecast for 2024-2026. We expect net profit to be 60.5/66.2/74.7 (previous value 68.6/76.8/81.4) billion yuan, -14.7%/+9.3%/+12.9% year-on-year, and EPS of 1.95/2.14/2.41 yuan, respectively, corresponding to the current stock price PE of 9.1/8.3/7.3 times. The company's entire natural gas industry chain layout and integrated business highlight long-term advantages. Performance is expected to improve further and maintain a “buy” rating.

The volume of gas traded on domestic platforms nearly doubled, and retail gas volume recovered year on year 2024Q1. The company actively promoted the main natural gas business to continue to grow on a large scale, achieving total gas sales of 10.04 billion square meters, +5.5% over the same period last year. Natural gas platform trading gas: 2024Q1 achieved platform trading gas sales volume of 1,213 billion square meters, with China's domestic gas volume of 833 million square meters, +95.5% year over year, and international gas volume of 380 million square meters, -21.2% year over year. The company actively innovated business models for the needs and characteristics of different types of enterprises, and took more measures to expand the domestic platform gas business scale, achieving significant results. Natural gas retail: The 2024Q1 retail gas business gradually recovered, achieving retail gas sales volume of 7.237 billion square meters, of which industrial and commercial gas volume was 5.224 billion square meters, +2.9% year-on-year, an increase of 2,929,000 m3/day, and achieved 1,947 billion square meters, +2.5% year-on-year, and 333,000 new household users. Comprehensive energy business: 2024Q1 achieved sales of 9.136 billion kilowatt-hours of energy such as cold, heat, and electricity, or +29.4% year-on-year.

Energy business integration to build the Zhoushan receiving station, an intelligent natural gas ecosystem operator: In 2022, the company completed the merger and acquisition of the Zhoushan LNG terminal. The actual processing capacity reached 7.5 million tons/year, and the third phase added 3.5 million tons/year. The actual processing capacity of the terminal is expected to exceed 10 million tons/year after production is put into operation in September 2025. Long-term agreement to lock in gas sources: In 2023, the company signed a new long-term agreement of 1.8 million tons/year with the US company Cherney. The NEXTdecade 2 million ton long-term agreement came into effect, the long-term agreement with Chevron and Total determines the price for the next 5 years, and signed a medium- to long-term purchase and sale contract with CNPC and a cooperation agreement for the utilization of facilities in Zhoushan. The company has now accumulated more than 10 million tons/year of natural gas long-term cooperation resources, and has built an international LNG capacity pool to obtain the capacity resources of 10 LNG ships. Natural gas ecological operator: The company has formed an integrated industrial layout of upstream gas sources, midstream storage and transportation, and downstream distribution. By integrating domestic and foreign resources and optimizing sales models, it has formed an intelligent operation platform integrating natural gas and integrated services. The company's sales volume of integrated energy such as cooling, heat, and electricity has increased dramatically. In terms of dividends: The company paid a cash dividend of 0.91 yuan/share (tax included) in 2023, fulfilling the company's promise to distribute cash dividends of no less than 0.15 yuan/share (tax included) in 2023-2025. Combined with the 2024/2025 special dividend of 0.22/0.18 yuan/share (tax included) in the company's special dividend plan, we expect the company's 2024/2025 cash dividend not less than 1.03/1.14 yuan/share (tax included). Continued high dividends highlight the company's investment value.

Risk warning: Platform trading gas business development falls short of expectations; risk of narrowing product spreads; policy risk; risk of changes in macroeconomic and market environment.