[ET Net News Agency, 23 January 2018] HSBC Global Research lowered its target price for
China Resources Gas (CRG)(01193) to HK$26 from HK$28, and maintained its "hold" rating.
The research house said CR Gas also experienced margin pressure from higher gas input
costs in November-December 2017, resulting from PetroChina's price hike as well as ad hoc
purchases of expensive LNG from the Shanghai Exchange. The company expects dollar margins
at RMB0.60-0.62/m3 for 2017 (2016: RMB0.71/m3), with 2H 207 significantly lowered to
RMB0.56-60/m3 (1H 2017: RMB0.64/m3).
But HSBC appreciates CRG for its superior gas volume growth and effective execution.
However, contractions in dollar margins during 1H17 appeared to be steeper than expected,
and the research house thinks CRG faces higher downside risks than its peers from the new
regulated ROA model, given its higher exposure to more mature (tier 1-2) cities at better
returns. It is also less exposed to the energy conversion theme from coal to gas. HSBC
believes the stock is fairly valued; hence, it thinks the share price may continue to
underperform its peers. (KL)