[ET Net News Agency, 8 July 2019] Goldman Sachs noted that the NDRC's final policy
guidance caps connection fee margins at 10%; however, importantly the NDRC was definitive
on the inclusion of future maintenance costs, which substantially reduces the risk of
adverse provincial announcements on connection fee cuts.
With urban gas penetration still around 60% across Goldman's coverage, the research
house said this improves earnings visibility for the connection business, which still
contributes 15-50% of annual company EBIT on average. Goldman still assumed Rmb100 per
household reduction in average portfolio connection fees in 2019 (on mix effect).
It raised its target prices for most of its China gas coverage due to rolling forward
the valuation and increasing the target P/E multiples for companies that have high
exposure to connection fees and solid gas volume growth.
Name Rating Target Price
-------------------------------------------------------
ENN Energy (02688) Buy HK$90.00 to HK$100
China Gas (00384) Buy HK$32.80 to HK$35.6
CR Gas (01193) Neutral HK$35.55 to HK$39.70
HK & China Gas (00003) Neutral HK$17.09 to HK$17.12
Towngas (01083) Buy HK$4.500 to HK$4.85
Tian Lun Gas (01600) Buy HK$10.50 to HK$11.50

(KL)