The Zhitong Finance App learned that Dongwu Securities released a research report saying that on March 15, the Shenzhen Development and Reform Commission issued the “Notice on Jointly Adjusting the Sales Price of Pipeline Natural Gas in Our City”. The bank believes that the current increase in residential gas prices is 0.31 yuan/square, in line with the favorable price trend in the natural gas industry and realizes the linkage between sales prices and procurement costs. Industrial and commercial gas prices can still be adjusted flexibly, with room for a 20% increase. The national smooth price gradually progressed, and the profits of urban gas companies were further restored. The reasonable price difference was 0.6 yuan/square square +, saving room for 20% increase. The bank believes that the price gap in the urban fuel sector will continue to be fixed, and that it will push forward valuations in line with the price.

The views of Soochow Securities are as follows:

Procurement costs in Shenzhen have been re-approved, and the benchmark prices for both residents and businesses have increased by 0.31 yuan/cubic meter over the previous review period.

On August 1, 2022, Shenzhen issued the “Notice on Adjusting Pipeline Gas Prices in Our City and Improving the Linkage Mechanism for Upstream and Downstream Prices”. The “Notice” mentions that in 2018-2020, the Shenzhen Gas Group pipeline gas distribution cost is 0.5465 yuan/cubic meter, the approved comprehensive gas distribution price is 0.7799 yuan/cubic meter (tax included, same below), and the average purchase cost is 2.0961 yuan/cubic meter as the benchmark price for future upstream and downstream price linkage mechanisms; Shenzhen pipeline gas residential sales prices still use three-tier gas prices. The first tier price is 3.10 yuan/cubic meter, and the benchmark sales price for industrial and commercial gas is 3.99 yuan/cubic meter. On March 15, 2024, the Shenzhen Development and Reform Commission issued the “Notice on Jointly Adjusting the Sales Price of Pipeline Natural Gas in Our City”. The “Notice” mentioned that from October 2021 to October 2023, the average procurement cost of the city gas group was 3.0498 yuan/cubic meter, and the current consolidated adjustment amount was 0.31 yuan/cubic meter, with an average purchase cost of 2.4061 yuan/cubic meter as the base period cost for the future upstream and downstream price linkage mechanism; the consumer sales price of pipeline gas in Shenzhen still uses three-tier gas prices. The first tier price is 3.41 yuan/cubic meter. The benchmark sales price for industrial and commercial gas is 4.30 yuan/cubic meter. The benchmark price for both residents and industry and commerce has increased 0.31 yuan/cubic meter over the previous certification period. cubic meters.

The gas consumption of residents in Shenzhen is progressing smoothly, and industrial and commercial gas prices can still be adjusted flexibly and there is room for a 20% increase.

The current increase in household gas prices was 0.31 yuan/square meter, in line with the trend of favorable prices in the natural gas industry and realized the linkage between sales prices and procurement costs. The benchmark sales price for industrial and commercial gas is 4.30 yuan/cubic meter. Based on the benchmark price, gas suppliers can negotiate to determine the specific sales price within a 20% increase and an unlimited decrease. The maximum price is raised from 4.78 yuan/square meter to 5.16 yuan/square meter. Industrial and commercial gas prices can still be adjusted flexibly, with room for a 20% increase.

The national smooth price gradually progressed, and the profits of urban gas companies were further restored. The reasonable price difference was 0.6 yuan/square square +, saving room for 20% increase.

From 2022 to 2024M2, a total of 135 prefecture-level cities (accounting for 47%) across the country achieved favorable gas prices for residents, with a price increase of 0.22 yuan/square meter. The off-season is coming soon. The bank believes that cities that have not had favorable prices will use the off-season window period to continue to promote good prices. It is expected that before the 2024 heating period arrives (before the end of October 2024), more cities will push for favorable price implementation, and favorable price flexibility will continue to show. The price difference of leading urban fuel companies is expected to be 0.50 to 0.52 yuan/square in 2023. The bank estimates that the reasonable value of urban fuel gas distribution costs is above 0.6 yuan/square meter, and there is still room for 20% repair of the price difference.

Domestic and international gas prices have declined, and domestic cost pressure has eased, boosting demand.

2024/3/15, US HH/European TTF/East Asia JKM/China LNG factory/China LNG year-on-year ratio: -30.4%/-33.0%/-37.1%/-18.8%/-34.0% to 0.4/2.2/2.9/2.2 yuan/square. The average gas-oil ratio (JKM to Brent unit calorific value price ratio) from January to February 2024 was 0.85, down 34% from the 2021-2023 average of 1.29. In 2023, China's apparent gas consumption rebounded at a low of 7.2% (+9.9pct). The fall in gas prices is expected to spur long-term growth in demand. It is estimated that the share of primary energy consumption of natural gas will gradually increase from 8.5% in 2022 to 15% in 2030, and demand will rise again by 6% in 2022 to 2030.

Investment suggestions: Foreign gas prices fall, domestic cost pressure eases to increase demand; price differences in the urban combustion sector will continue to be fixed, and favorable prices will push up valuations; high-quality cash flow leaves room for doubling the PB/ROE valuation of standard Changjiang Electric.

1) Benefit from the favorable price policy and increase the spread. Recommended attention: Kunlun Energy (00135), Xinao Energy (02688), China Gas (00384), China Resources Gas (01193), Ganghua Smart Energy (01083), Shenzhen Gas (601139.SH).

2) High dividend cash flow assets. Key recommendations: 2023 dividend rate 6.2% Blue Sky Gas (605368.SH), 2023 dividend rate 4.7% Xinao Shares (600803.SH), (valuation date 2024/3/18).

3) It has marine gas resources and a cost advantage. Key recommendation: Jiufeng Energy (605090.SH).

Risk warning: extreme weather, changes in the international situation, and economic growth falling short of expectations.