[ET Net News Agency, 30 March 2020] Daiwa Research lowered its target price for China
Resources Gas (CRG)(01193) to HK$39.5 from HK$47 and downgraded its rating to
"underperform" from "outperform".
The research house said CRG's 2019 recurring earnings of HK$4.9bn was slightly below
Daiwa's estimate. CRG expects a CNY0.02/m3 dollar margin squeeze in 2020 given it may need
to offer some discount to users who consume more natural gas to maintain volume growth. As
such, Daiwa cut its 2020-21 gas sales volume growth from 15-24% to 8-17% on a further
squeeze in the dollar margin.
Given a high HK$3.5bn M&A capex for Ningbo, etc, Daiwa expects CRG's FCF to turn
negative despite a strong net-cash balance sheet. (KL)