> **来源：[研报客](https://pc.yanbaoke.cn)** # ENN ENERGY (2688 HK) Company Report Summary ## Core Content ENN Energy (2688 HK) continues to show strong performance in its gas sales and integrated energy business. The report highlights the company's ability to maintain growth despite economic challenges, supported by diversified customer bases, competitive pricing, and government initiatives. The management remains confident in achieving its full year growth guidance and is optimistic about future performance. ## Main Points - **Gas Sales Growth**: - Gas sales volume in Jul-Oct 2018 recorded a **20-25% YoY increase**, driven by **residential usage (>25%)** and **C/I customers (20-25%)**. - Management is confident in achieving the **2018E gas sales volume growth guidance** of **20-25%** and expects **~20% YoY growth** for 2019-20E. - The company aims to roll out **2.3 million new gas connections** in 2018, with **70% from new buildings**, **20% from old buildings**, and **10% from rural areas**. - **Margin Improvement**: - The **gas sales dollar margin** is expected to rebound to **RMB0.64/cu m** in 2H18 from **RMB0.62/cu m** in 1H18. - The improvement is attributed to: 1. Agreements with ~90% of C/I customers for cost hikes during winter. 2. Use of **imported LNG** for the remaining 10% of C/I customers, which offers a **cost advantage of RMB417-717/ton**. 3. A **high cost base in 1H18** due to the purchase of expensive spot LNG. - **Integrated Energy Business Expansion**: - As of Oct 2018, the company secured **80bnkWh/year** in contracted energy sales, reaching **80%** of its full year target. - **15 additional projects** are expected to commence operations in 2H18. - The integrated energy segment is projected to contribute **20-30%** of revenue in 2020 and achieve a **~15% margin** once projects mature. - **Investment Recommendation**: - The **rating is maintained as BUY**, with a **revised DCF-based target price of HK$88.4** from HK$88.0. - The adjustment considers **RMB depreciation**, **valuation roll-over**, and an **increased WACC assumption** from 8.5% to 8.8%. - The stock is trading at a **2019E P/E of 13.4x**, near its **5-year historical average of 13.7x**. - The **recurrent EPS CAGR** is expected to be **15%** over 2018-20E, with a **valuation deemed undemanding**. ## Key Financial Highlights (2016-2020E) | Metric | 2016 | 2017 | 2018E | 2019E | 2020E | |--------------------------|----------|----------|---------|---------|---------| | Revenue (RMB mn) | 34,103 | 48,269 | 61,307 | 75,887 | 91,063 | | Gross Profit (RMB mn) | 7,350 | 8,339 | 9,844 | 11,249 | 12,851 | | Recurring Net Profit (RMB mn) | 3,212 | 3,697 | 4,296 | 4,936 | 5,666 | | Recurring EPS (RMB) | 2.76 | 3.41 | 3.96 | 4.56 | 5.23 | | Core P/E (x) | 22.1 | 17.9 | 15.4 | 13.4 | 11.7 | | P/B (x) | 4.4 | 3.9 | 3.3 | 2.8 | 2.5 | | Dividend Yield (%) | 1.2 | 1.5 | 1.9 | 2.4 | 3.0 | | ROE (%) | 15.1 | 17.6 | 23.3 | 22.8 | 22.5 | | Net Debt/Equity (%) | 52.0 | 48.7 | 45.5 | 40.8 | 35.4 | ## Catalysts and Risks ### Upward Catalysts: - **Stronger gas demand**. - **More cost savings** from LNG import. - **Faster development** of integrated energy projects. ### Downside Risks: - **Slowdown in gas demand**. - **Delays in greenfield projects**. - **Inability to pass through increased costs** to end users during winter. ## Financial Ratios (2016-2020E) | Ratio | 2016 | 2017 | 2018E | 2019E | 2020E | |-------------------------|----------|----------|---------|---------|---------| | Gross Margin (%) | 21.6 | 17.3 | 16.1 | 14.8 | 14.1 | | EBITDA Margin (%) | 16.5 | 13.1 | 12.5 | 11.8 | 11.3 | | Net Margin (Core) (%) | 9.4 | 7.7 | 7.0 | 6.5 | 6.2 | | ROE (%) | 15.1 | 17.6 | 23.3 | 22.8 | 22.5 | | ROIC (%) | 12.4 | 13.6 | 18.2 | 18.5 | 19.0 | | Net Debt/Equity (%) | 52.0 | 48.7 | 45.5 | 40.8 | 35.4 | ## Investment Ratings - **Industry Rating**: OVERWEIGHT (expect the sector to outperform the market over the next 12 months). - **Company Rating**: BUY (expect the stock to generate 10%+ return over the next 12 months). ## Conclusion ENN Energy is expected to maintain strong growth in gas sales and improve its margins through cost-effective LNG sourcing and a diversified customer base. The integrated energy segment is on track for significant revenue and margin contributions in the coming years. The company's financials and valuation suggest a **BUY** recommendation with a **revised target price of HK$88.4**. The stock is undervalued relative to its historical P/E ratio, and the company is well-positioned for continued growth.