Daiwa Research lowered its target price for China Gas (CGHL)(00384) to HK$25 from HK$29.5 and downgraded its rating to "hold" from "outperform".
The research house said CGHL's share price plunged 9% on 29 June after it announced FY2020 results on 26 June, with gas sales and VAS profit guidance cut for FY2021, and FCF (free cash flow) unlikely to turn positive until FY2022.
Given insufficient details of the new LPG micro-pipeline project and possible cancellation/reduction of gas sales subsidy for CGHL's rural gas projects before the winter of 2020-21, Daiwa believes CGHL lacks catalysts.
Daiwa raised its FY2021-22 EPS forecasts by 3-8% to reflect the better margin for CGHL's residential connections.
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