Huatai Research lowered its target price for Towngas China (TCCL)(01083) to HK$6.1 from HK$6.5 and maintained its "hold" rating.
The research house remains cautious on TCCL's potential growth considering no new acquisitions nor other new business plans. Huatai cut its earnings forecasts for 2019/20 by 3/5%, to reflect the slowdown in the growth of domestic gas demand and a further decline in connection margin.
The NDRC announced on 3 July new rules to regulate the gas connection market by setting reasonable returns on connection fees. Huatai expects the new regulations will have limited impact on gas companies. Without further concerns on policy uncertainties, it forecast the operating margin of connection business to stay at 43% in 2019.
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