Zhitong Finance APP learned that CICC issued a research report and maintained“Outperform Industry” rating with a target price of HK$43.
According to the report, according to media reports, China Gas is expected to place 392 million shares at a price of HK$29.75-30.75 per share on a first-old-new-for-new basis, a 6-9% discount to the latest closing price. The company estimates that the total financing amount is US$1.502-1553 billion (corresponding to HK$11.66-12.05 billion). CICC estimates that approximately HK$12 billion from this financing will be used to invest HK$6 billion annually in the next two years, including HK$3 billion in mergers and acquisitions in the city gas sector, HK$1.5 billion in LPG micropipe network, and HK$1.5 billion in Southern Warm House business.
The bank said that in mergers and acquisitions in the city gas sector, the company is expected to have strong project reserves, and large-scale mergers and acquisitions will be implemented during the year. It may refer to the mode of/Shanghai Gas and carry out the extension type through the company’s equity participation. expansion. Taking into account the 7.5% dilution brought about by the placement, the stock price of this stock is expected to fluctuate in the short term, but the long-term investment logic is still stable, providing better entry opportunities for long-term funds.
CICC expects that the company’s financing is mainly for mergers and acquisitions of large-scale city gas projects. If it can be implemented at a reasonable valuation, it will be a positive catalyst. It is predicted that the gas volume in 1Q21 this year (calculated in calendar years) will recover about 35% year-on-year. Taking into account last year’s low base, especially the company’s more projects in Hubei Province, the impact was greater during the epidemic last year. The bank expects FY21 gas volume growth to be close to 20%, which is basically in line with the company’s high double-digit growth guidelines .
The report mentioned that in the coming 14th Five-Year Plan period, the warm home market in the southern region will be the company’s focus on areas. Compared with the central heating in the northern region, the southern region, especially in the south of the Yangtze River Basin, also has a greater demand for winter heating. Calculated based on the 200 yuan/square meter connection and renovation fee, a single-family household is expected to contribute 20,000 yuan in connection fees, and the average household income is more than 8 times the city gas connection fee. It is estimated that the average gross profit per household is expected to reach 8,000 yuan, and the net profit margin is in the range of 6,000 to 7,000 yuan, which will become a strong profit driver in the next few years. Driven by the warm home business, it is predicted that the company is expected to achieve its FY22 profit target of 14 billion Hong Kong dollars Spark Global Limited.
article links：The city gas project to acquire a target price of HK$43
Reprint indicated source：Shine Trader Limited Live information