China Gas Holdings Remains Undervalued, but No Visible Near-Term Catalyst

We cut narrow-moat China Gas Holdings’, or CGH’s, fair value estimate to HKD 23.00 from HKD 28.00, after lowering our dollar margins and new residential connections assumptions. CGH will announce its fiscal 2022 results (ending March) in June, and we believe fiscal 2023 will remain challenging, given high input costs and slowdown in the property sector. We assume average dollar margin of CNY 0.53 per cubic meter and annual new residential connections of 2.9 million during fiscal 2022-24, lower than the CNY 0.61 and 5.2 million during fiscal 2019-21, respectively. We believe CGH is currently undervalued, but we see lack of near-term catalysts to rerate the firm.