China Gas Holdings’ Mixed Fiscal 2022 Results In Line; Shares Undervalued

Narrow-moat China Gas Holdings’, or CGH’s, fiscal 2022 (ending March) core net profit of HKD 8.05 billion, down 22% year on year, was in line with our expectation but missed FactSet’s consensus estimate. We lower our fair value estimate to HKD 20 from HKD 23, after considering the depreciation of the Chinese yuan and slower earnings growth for the value-added services, or VAS, segment. We think CGH is undervalued at the current share price given its undemanding valuation. However, we acknowledge that the firm will need to show consistent improvement in earnings and cash flows before a rerating kicks in. Despite the weaker earnings, fiscal 2022’s dividend remains unchanged at HKD 0.55 per share, as management remains focused on improving shareholder returns.