FY21: Weaker-than-Expected Earnings; Outlook Clouded By Explosion
China Gas reported weaker-than-expected FY21 net profit growth of 14% yoy. It guided 15% net profit growth and 5m new gas connections for FY22. We share management’s view that the explosion is an isolated incident, rather than a systemic issue at the group level. However, in the near term, we believe the incident would continue to cloud the company’s growth outlook and re-rating would require further catalysts. Downgrade to HOLD with a lower target price of HK$27.50. Entry price: HK$24.00.