[ET Net News Agency, 18 July 2019] Daiwa Research raised its target price for China Gas
(00384) to HK$26.9 from HK$22.9 but downgraded its rating to "underperform" from "hold"
noting rich valuation.
China Gas management targets increasing its sales volume into China's North-East (NE) to
10bcm by 2025 and 20bcm by 2030. While the Russian gas supply offers growth potential, the
research house believes it is reflected in the share price.
Daiwa said the ramp-up of the Russian gas supply will be gradual and only reach full
utilisation by 2024/25. The eastern pipeline is connected to nine provinces and is an
important gas supply source, accounting for 30% of piped imports by 2025. Assuming 45% of
the gas is supplied to the NE region and China Gas has 50% market share, Daiwa expects the
sales volume to reach 9.4bcm or 12% of total gas sales in 2025.
As the Russian gas supply ramps up, Daiwa believes the NE dollar margin will decline to
CNY0.3/m3, similar to other regions. (KL)