China Resources Gas’ 2022 Results Below Expectation; Recovery Expected in 2023

Narrow-moat China Resources Gas’, or CRG’s, 2022 net profit of HKD 4.7 billion, down 26% year on year, was below our expectation. This was mainly attributable to higher operating costs and lower contribution from joint ventures. We lower CRG’s fair value estimate to HKD 33.50 from HKD 39.00 to factor in the disappointment. We think the firm is fairly valued currently as we believe negative concerns have been largely priced in. CRG is trading at around 11 times forward P/E, the lower end of its five-year historical trading range of around 7 times to 19 times. Despite the weaker earnings, CRG’s payout ratio was increased to 50% in 2022 from 45% in 2021, implying a decent estimated 2023 dividend yield of more than 4%.