20180817-广发证券_香港_-A-Share_Natural_Gas_Sector_2页_363kb

A-Share Natural Gas Sector Summary

Core Content

The report provides an analysis of the Chinese natural gas sector, focusing on demand growth, supply dynamics, and investment recommendations for the short and medium term. It highlights the key factors influencing the sector and suggests stocks to watch based on market expectations and sector performance.

Main Views and Key Information

Demand Growth

• Household consumption: Rising household demand is a major driver of natural gas growth.
• Coal-to-gas substitution: This policy has been instrumental in boosting natural gas consumption, particularly in urban and industrial areas.
• Seasonal demand: Natural gas demand is highly seasonal, with lower consumption during the non-heating season (April–October) and significant increases during the winter heating season (November–March).
• Winter demand: During the winter months, demand is expected to remain robust due to cold weather and the need for heating, which may also lead to peak shaving pressure.

Supply Dynamics

• Supply growth: In 2018, China's natural gas supply reached around 265.6bn m³, an increase of 10.3% YoY.
• Infrastructure development: The construction of new infrastructure, including the Central Asia-China Gas Pipeline Line D and the China-Russia Eastern Natural Gas Pipeline, is expected to come online in 2019–20, which will increase supply.
• LNG receiving terminals: New LNG terminal operations slowed in 2019 after a significant increase in 2018.
• Supply-demand balance: Despite supply growth, the sector is expected to maintain a tight supply-demand balance in the short term.

Investment Recommendations

• Short-term: The sector is expected to outperform the benchmark due to strong winter demand and potential price rebounds for LNG.
• Stocks to watch:
  • Upstream resource sectors: Companies involved in natural gas exploration and production.
  • LNG transshipment: Companies engaged in LNG transportation and distribution.
  • Methanol and urea: Industries that use natural gas as a raw material may scale back operations during winter, while those using coal may benefit.
  • Recommended stocks: Guanghui Energy (600256 CH) and ENN Ecological Holdings (600803 CH).

Risks

• Coal-to-gas substitution progress: If this initiative does not meet expectations, it may negatively impact demand.
• Winter consumption: If natural gas consumption during the winter is lower than anticipated, it could affect the sector's performance.

Rating Definitions

• Sector ratings:

  • Positive: Expected to outperform the benchmark by more than 10%.
  • Neutral: Expected relative performance ranges between -10% and 10%.
  • Cautious: Expected to underperform the benchmark by more than 10%.

• Company ratings:

  • Buy: Expected to outperform the benchmark by more than 15%.
  • Accumulate: Expected to outperform the benchmark by more than 5% but not more than 15%.
  • Hold: Expected relative performance ranges between -5% and 5%.
  • Underperform: Expected to underperform the benchmark by more than 5%.

Analyst Certification

The analysts responsible for this report confirm that all views expressed reflect their personal opinions and that no part of their remuneration is tied to specific recommendations.

Disclosure of Interests

• Proprietary trading: GF Securities (Hong Kong) and its affiliated companies do not hold any shares in the mentioned securities.
• Investment banking: No investment banking relationships with the companies mentioned in the past 12 months.
• Conflicts of interest: Analysts and their associates are not officers of the companies mentioned and have no financial interests in the securities.

Disclaimer

• This report is for informational purposes only and does not constitute an offer to buy or sell securities.
• The report is intended solely for GF Securities (Hong Kong) clients.
• No action has been taken to permit distribution in jurisdictions where it is unlawful.
• GF Securities (Hong Kong) accepts no liability for losses arising from the use of the report.
• Investments involve risks, and past performance does not guarantee future results.
• The report is not a substitute for professional advice.

Copyright

• This document is copyrighted by GF Securities (Hong Kong) Brokerage Limited.
• Unauthorized copying or redistribution is prohibited without prior written consent.