Jinwu Financial News | According to the Sino-Thai International Development Research Report, Tianlun Gas (01600) FY23's profit declined to rise, and shareholders' net profit rose 7.9% year on year to 480 million yuan (RMB, same below), but it was still lower than the bank's forecast of 660 million yuan by 27.1%. According to the guidelines given by the company last year, some operating performance was basically in line with, for example, (1) gross gas sales margin of 0.48 yuan/square meter (guideline: 0.48-0.50 yuan/square meter); (2) 285,000 new urban combustion residents (guideline: 280,000 to 300,000 households).
The company announced prudent FY24 guidelines, including (1) retail gas sales increased by 5%-6% year on year; (2) gross sales margin of 0.48-0.50 yuan/square meter; and (3) the addition of 280,000 to 300,000 new urban fuel households. However, considering that FY23's performance in meeting the standards is not ideal, compounded by risks in the mainland real estate market affecting gas business expansion, I conservatively expect FY24 retail gas sales to increase 4.4% year-on-year, adding 222,000 new urban fuel residents.
In response to FY23 results and the company's FY24 guidelines, the bank reduced FY24-25 shareholders' net profit forecasts by 32.1% and 36.2% to $540 million and $600 million respectively, up 11.9% and 12.6% year-on-year. Accordingly, the target price was reduced from HK$6.12 to HK$5.05, corresponding to 8.5 times the FY24 price-earnings ratio and 0.1% room for growth. The company's stock price rose by 28.2% in the past three months, far superior to peers and the Hong Kong stock market. The current price roughly reflects the company's reasonable valuation. The bank downgraded the rating from “buy” to “neutral.” The bank will promptly follow up on the company's operating progress and further adjust the valuation.