[ET Net News Agency, 15 November 2017] HSBC Global Research raised its target price for
Beijing Enterprises Holdings (BEH)(00392) to HK$53 from HK$48, and maintained its "buy"
rating.
The research house witnessed the development of the government's effort in converting
energy use from coal to natural gas during its recent site visits in mainland China. Based
on its discussions with government regulators in Beijing, HSBC believes local subsidies in
both urban and rural areas are in place to support end-users to switch from coal to gas.
HSBC likes BEH for its defensive and clear growth in Beijing, while its 40% stake in the
Shaanxi-Beijing pipelines should be a natural beneficiary of China's growing demand on the
use of natural gas in northern and northeastern areas.
While the recent transmission tariff cut would hurt its margin, this has been largely
expected by the market since the industry reform for gas transmission pipelines in late
2016, which should also remove the risk overhang on future tariff changes, said the
research house.
The regulation for the downstream gas business has also been clarified in June 2017,
where BEH has experienced minimal impact. The share price performance has lagged behind
peers but the stock should deserve a re-rating on a discounted valuation at 0.9x 2017 PB.
(KL)