Jinwu Financial News | According to the China-Thailand International Development Research Report, after recently researching Tianlun Gas (01600), the bank believes that the company's operations are developing healthily: (1) the number of new urban gas residential users continues to grow; (2) gas sales are rising steadily; and (3) the gas balance mechanism has been improved at an accelerated pace. The bank expects the number of new urban gas residents to reach the target of 280,000 to 300,000 new urban gas residents throughout 2023, which is the same as the actual increase of 283,000 households in 2022, because the company's projects are mainly located in third- and fourth-tier cities, and are mostly supported by demand. The number of new urban fuel users added in the first half of this year actually increased 4.4% year on year to 138,000.
Furthermore, the bank mentioned that local governments have raised retail gas prices for residential users one after another this year to improve the price adjustment mechanism. By the end of the first half of this year, in terms of gas sales, about 46% of residential users had completed the price adjustment process. Up to now, about 90% of residential users have completed the price adjustment process, slightly exceeding the company's expectations. The bank expects the gas sales price difference in 2023 to reach the company's target of 0.48-0.50 yuan (RMB, same below), which is higher than the price difference of 0.42 yuan in 2022. The gas price difference in the first half of this year actually rose 13.9% year on year to 0.41 yuan.
Operating cash flow is expected to remain positive and grow this year, but the bank does not rule out the possibility that net cash flow will shrink due to falling financing cash flow. The bank maintained its profit forecast and target price of HK$6.12, corresponding to 7.0 times the target price-earnings ratio for 2024 and room for growth of 61.1%. Reiterate the “buy” rating.