China Gas Holdings: ENN Energy’s Operating Statistics Reaffirm Recovery Outlook in 2023

Overall, we think the city gas sector is currently undervalued, but our preferred pick is ENN Energy, given its well-diversified earnings and ability to source competitively priced gas. Following first-quarter operating data from ENN, we keep ENN’s fair value estimate at HKD 130 and we think the shares are attractive now with key negatives largely priced in. We believe the data reaffirms a gradual recovery for the industry. ENN keeps its key guidance unchanged, and this also indicates a better outlook for China Gas Holdings and China Resources Gas, where we maintain our fair value estimates of HKD 16.30 and HKD 33.50, respectively, after reviewing our earnings forecasts. Taking into account weaker 2022 results from ENN and CRG, we think CGH will post a 22% fall in fiscal 2023 (ending March) earnings before recovering in fiscal 2024.