[ET Net News Agency, 8 April 2020] Citi Research lowered its target price for China Gas
Holdings (00384) to HK$32 from HK$33 to reflect the profit cuts and maintained its "buy"
rating.
The research house trimmed China Gas's net profit estimates by 4% for FY2020 and 3% for
FY2021, mainly to reflect lower retail natural gas sales volume growth, impacted mostly by
COVID-19.
Citi now assumed China Gas to achieve positive free cash flow from FY2022 (versus FY2021
earlier), taking into account slower subsidy payment from local governments.
Citi calculated that China Gas's dollar margin of retail natural gas sales was
Rmb0.60/m3 for FY2020, including Rmb0.62/m3 in 1H and Rmb0.59/m3 in 2H. The mild dollar
margin contraction was conceivable due to higher gas sales mix to the residential sector
(with lower margins) as a result of heat supply and some discounts offered to especially
small industrial end-users as per the PRC government's request. (KL)