External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Equity Bottom-Up

<ul><li>CRG has announced its FY22 results. CRG recorded HK$94.34bn revenue, with total gas sales volume up by 5.3%YoY. Dragged by higher gas costs, its pre-tax profit dropped by 25.3% YoY.</li><li>However, CRG achieved 4.08mn new residential users, beating consensus. CRG’s comprehensive service achieved a rapid surge and the Company continued to invest in its business expansion.</li><li>For 2023, considering the economic recovery and lower gas cost, we forecast the total gas sales volume will achieve low-double-digit growth and dollar margin will rebound to RMB0.5cbm.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

CRG has announced its FY22 results. CRG recorded HK$94.34bn revenue, with total gas sales volume up by 5.3%YoY. Dragged by higher gas costs, its pre-tax profit dropped by 25.3% YoY.However, CRG achieved 4.08mn new residential users, beating consensus. CRG’s comprehensive service achieved a rapid surge and the Company continued to invest in its business expansion.For 2023, considering the economic recovery and lower gas cost, we forecast the total gas sales volume will achieve low-double-digit growth and dollar margin will rebound to RMB0.5cbm.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

CR Gas (1193 HK) – Expect 2023 profit rebound ahead; attractive valuation

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>While <a href="https://www.smartkarma.com/entities/china-gas-holdings-ltd" target="_blank" data-smartkarma-citation="entities:14315:1" rel="noopener">China Gas Holdings (384 HK)</a> expects better gas dollar margin HoH, there are still high profit uncertainties and its full-year operational guidance does not look exciting.</li>
<li>The expectation of flat to 10% YoY decline in new residential household connections is not encouraging. With 1H FY23 profit only amounted to 42% of consensus, we see downgrade risks.</li>
<li>Despite achieving positive free cash flow, its high gearing of 69.9% (+4pp HoH) is still very stretched relative to peers. We prefer <a href="https://www.smartkarma.com/entities/kunlun-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:10054:1" rel="noopener">Kunlun Energy (135 HK)</a>.</li>
</ul>


While China Gas Holdings (384 HK) expects better gas dollar margin HoH, there are still high profit uncertainties and its full-year operational guidance does not look exciting.
The expectation of flat to 10% YoY decline in new residential household connections is not encouraging. With 1H FY23 profit only amounted to 42% of consensus, we see downgrade risks.
Despite achieving positive free cash flow, its high gearing of 69.9% (+4pp HoH) is still very stretched relative to peers. We prefer Kunlun Energy (135 HK).


China Gas Holdings (384 HK): Still Not Meeting Expectations

Thematic (Sector/Industry)

<ul><li>In our last report dated 17 October, we highlighted a list of 21 long ideas.</li><li>The basket (equal weighted) of these 21 stocks underperformed MSCI China index by 5.4ppt, delivering 0.2% return (vs MSCI China 5.6%).</li><li>China Meidong Auto and Innovent Biologics delivered over 20% of return, and 4 of our 21 long ideas outperformed the benchmark.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

In our last report dated 17 October, we highlighted a list of 21 long ideas.The basket (equal weighted) of these 21 stocks underperformed MSCI China index by 5.4ppt, delivering 0.2% return (vs MSCI China 5.6%).China Meidong Auto and Innovent Biologics delivered over 20% of return, and 4 of our 21 long ideas outperformed the benchmark.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

CMBI Research Focus List (November Edition) – Our best high conviction stock ideas

<div><ul><li>CRG’s latest updates under mgmt.’s guidance are as follow: 1) retail gas sales vol. growth maintained at 8.2% YoY in Jan-Aug 2022 and targets at 8-10%YoY for FY22; 2) FY22 dollar margin aims to achieve RMB0.5/cbm; 3) gas connection segment maintained resilient growth in 2H22; 4) the robust growth momentum of value-added services will continue.</li><li>CRG is now trading at 8.72x FY22 forward PE, closest to the 10-year lowest PE.</li><li>We resume coverage and revised down our TP to HK$39.13 (based on 13x 2022E PE), reflecting prudent gas sales and dollar margin outlook. </li></ul></div>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

CRG’s latest updates under mgmt.’s guidance are as follow: 1) retail gas sales vol. growth maintained at 8.2% YoY in Jan-Aug 2022 and targets at 8-10%YoY for FY22; 2) FY22 dollar margin aims to achieve RMB0.5/cbm; 3) gas connection segment maintained resilient growth in 2H22; 4) the robust growth momentum of value-added services will continue.CRG is now trading at 8.72x FY22 forward PE, closest to the 10-year lowest PE.We resume coverage and revised down our TP to HK$39.13 (based on 13x 2022E PE), reflecting prudent gas sales and dollar margin outlook. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

CR Gas (1193 HK) – Eyes on 4Q Gas Dollar Margin and Solid Comprehensive Service Growth

<ul>
<li>Core net profit rose a healthy 10.9% at <a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a> in 1H22 despite challenges from pandemic lockdowns and surge in input costs.</li>
<li>We expect to see sequential improvement in both dollar margin for gas sales and overall gross margin in 2H22. Excellent integrated energy pipeline should add to earnings momentum.</li>
<li>Gearing improved 2.2pp in 1H22 and there is more room to deleverage in 2H22. While the stock's valuation is not particularly cheap, it has probably already hit the trough. </li>
</ul>


Core net profit rose a healthy 10.9% at ENN Energy (2688 HK) in 1H22 despite challenges from pandemic lockdowns and surge in input costs.
We expect to see sequential improvement in both dollar margin for gas sales and overall gross margin in 2H22. Excellent integrated energy pipeline should add to earnings momentum.
Gearing improved 2.2pp in 1H22 and there is more room to deleverage in 2H22. While the stock's valuation is not particularly cheap, it has probably already hit the trough. 


ENN Energy (2688 HK): Seeing Sign of an Upturn

Hong Kong

China Resources Gas Group Ltd distributes natural gas and petroleum gas in the cities of Chengdu, Fuyang, Huaibei, Linhai, Suzhou and Wuxi in the PRC. The Company also operates compressed natural gas filling stations in Chengdu, Nanjing and Wuxi. The group also is involved in bottled liquefied petroleum gas distribution in cities of Fuyang, Suzhou and Wuxi.

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CR Gas (1193 HK)

CR Gas (1193 HK) – Expect 2023 profit rebound ahead; attractive valuation

CRG has announced its FY22 results. CRG recorded HK$94.34bn revenue, with total gas sales volume up by 5.3%YoY. Dragged by higher gas costs, its...

CMB International

China Gas Holdings (384 HK): Still Not Meeting Expectations

1H FY23 result is disappointing and we see downside risks for consensus forecasts. We think 2H earnings will be at best flattish and its high...

Osbert Tang, CFA

CMBI Research Focus List (November Edition) – Our best high conviction stock ideas

In our last report dated 17 October, we highlighted a list of 21 long ideas.The basket (equal weighted) of these 21 stocks underperformed MSCI...

CMB International

CR Gas (1193 HK) – Eyes on 4Q Gas Dollar Margin and Solid Comprehensive Service Growth

We resume coverage and revised down our TP to HK$39.13 (based on 13x 2022E PE), reflecting prudent gas sales and dollar margin outlook.

CMB International

ENN Energy (2688 HK): Seeing Sign of an Upturn

Dollar margin recovery, strong integrated energy pipeline and value added business growth are key drivers for ENN Energy in 2H22 and FY23....

Osbert Tang, CFA

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