20181220-招商证券_香港_-Gas_Sector__Gasifying_China_23页_2mb

报告摘要

Gas Sector Summary

Core Content

The Gas Sector report from China Merchants Securities (HK) Co., Ltd. provides an in-depth analysis of the natural gas market in China, highlighting the resilient demand, supply constraints, and policy impacts in 2019 and beyond. It also evaluates the investment prospects for key players in the sector and outlines the government's strategic initiatives to promote gas consumption and infrastructure development.

Main Views

Gas demand is expected to grow at double-digit rates in 2019, driven by government environmental policies and price competitiveness compared to other fuels.
Supply constraints are gradually easing due to the expansion of LNG terminals and increased gas imports, including from Central Asia, Russia, and private sectors.
Policy risks related to connection fees are likely to persist until 1H19 but are expected to be resolved in the long term, with regulated margins staying within government acceptable levels.
Diversified business models and government support are key differentiators for leading gas operators.
Coal-to-gas conversion remains a major driver of demand, with residential, commercial, and industrial sectors all participating, though rural expansion faces gas supply limitations.
Natural gas price competitiveness is still maintained relative to LPG and fuel oil, especially when oil prices remain above US$50/barrel.
Government initiatives aim to increase natural gas consumption to 10% of the total energy mix by 2020, with targeted policies to support this goal.

Key Information

Gas Demand Trends

Gas demand in Jan-Oct 2018 grew by 18% YoY to 225bn cu m.
The government's target is to increase natural gas to 10% of total energy mix by 2020 from 7% in 2017.
Expected gas demand growth of 14.3% in 2018-2020, reaching 360bn cu m in 2020.

Supply Constraints

Gas import reliance is expected to rise from 39% in 2017 to 46% in 2020.
LNG terminals are expected to start operation from 2019, alleviating the gas shortage.
Domestic production growth is lagging behind demand, with conventional gas production expected to grow at 6.1% CAGR to 160bn cu m in 2020.
Unconventional gas (shale and CBM) is expected to contribute 40bn cu m to domestic production by 2020.

Policy Impact

Connection fee reforms are ongoing, but significant cuts are unlikely, as operating margins are expected to normalize at <20%, within government acceptable levels.
Coal-to-gas conversion in Northern China is a key policy driver, but PM2.5 levels rose in 2018 due to less stringent measures.
Government's commitment to environmental protection is reinforced through KPI evaluations and accountability measures.

Investment Recommendations

Top picks:
- China Gas (384 HK): Strong growth due to aggressive rural expansion, government subsidies, and diversified business (including VAS and integrated energy solutions).
- ENN Energy (2688 HK): Early mover in LNG import business, cost savings, and market share gains.
- CR Gas (1193 HK): Strong performance in gas storage and infrastructure.

Financial Highlights

Company	Ticker	Rating	Current Price (HK$)	Target Price (HK$)	Upside (%)	FY18E EPS	FY19E EPS	FY18E P/E	FY19E P/E	FY18E P/B	FY19E P/B	FY18E ROE	FY19E ROE
China Gas*	384 HK	BUY	27.80	37.10	33.5	1.45	1.75	19.2	15.9	4.9	3.9	23.9	22.8
ENN Energy	2688 HK	BUY	69.30	88.40	27.6	3.96	4.56	15.5	13.5	3.3	2.8	23.3	22.8
CR Gas	1193 HK	BUY	31.05	35.90	15.6	2.03	2.32	15.3	13.4	2.8	2.4	19.3	19.4

Key Policies Supporting Gas Demand

"Three years action plans for fighting for the blue sky" (Jun 2018): Expanded coverage to Yangtze River Delta and Fen-Wei Plain, with preferential supply to residential and heavily polluted areas.
Coal-to-gas conversion in 2+26 cities has exceeded expectations, with 4.2mn rural households converted in 2017.
Distributed energy and CBM-fired power plants are being encouraged to improve efficiency and reduce emissions.

LNG and Pipeline Development

LNG terminal capacity is expected to reach 84mtpa by 2020, with 10 new terminals expected to be operational in 2019-20.
Pipeline gas from Central Asia and Russia is under development, with Line D and Far Eastern Route expected to be completed in 2020 and 2019, respectively.
Private sector involvement is increasing in LNG and midstream infrastructure, with market-driven pricing for storage and peak load regulation.

Price Trends

Natural gas prices are still cheaper than LPG and fuel oil when oil prices are above US$50/barrel.
Domestic LNG ex-factory prices are higher than international prices, but competition from spot LNG is expected to increase.
Government may adjust city gate prices if oil prices fall below US$40/barrel for an extended period.

Conclusion

The natural gas sector in China is expected to continue its growth trajectory, supported by policy initiatives, infrastructure development, and price competitiveness. While policy risks remain, they are expected to be resolved by mid-2019, allowing for sustainable demand growth. Companies with diversified business models and strong market positions are positioned to benefit from the expanding market and increased gas supply.