China Gas Holdings Ltd, one of the major piped gas suppliers on the mainland, is on course to further expand its capacity and increase its penetration in the residential market to consolidate its leadership in the sector, Managing Director Liu Minghui told the media Thursday after the group reported 745 percent growth in net profit for the year ended March.

The group's turnover surged by 61.5 percent year-on-year to approximately HK$10.2 billion during the financial year, with its net profit climbing to approximate HK$875.6 million from HK$103.6 million.

Sales of liquefied petroleum gas (LPG) and natural gas as well as connections fees, the three main sources of revenue, registered year-on-year growth of 104 percent, 43 percent and 30 percent respectively.

"We are proud of what we have achieved so far. Looking ahead, we intend to enhance our market penetration and the gas volume of customers within our strong gas supply network," said Liu.

As of June 30, the group had acquired 50 new city piped gas projects, taking the total number of gas projects operated by the group to 123, of which 90 are currently in operation.

"These new concessions, some yet to start operating, are going to help us gain more market share and strengthen our role as the leading natural gas provider," Liu said, adding that the group is targeting an increase in natural gas sales to 4.8 billion cubic meters and 6 billion cubic meters by the end of 2011 and 2012, respectively.

Residential connections, enjoying a gross margin as high as 70.6 percent, constitute another focus of the group's further expansion.

At present, the group's gas projects cover a connectable population of around 56 million, with its overall gas penetration rate standing at 30 percent.

"Compared with the 60-70 percent level typical in mature markets, 30 percent is obviously too low. But this huge gap means at the same time enormous business opportunities for us in the next few years," said Eric Leung, chief financial officer of China Gas.

Currently, China Gas is also seeking to improve the profit margins of its LPG business, targeting a 17 percent gross margin from 8.7 percent currently, and a 6 percent net profit margin from 0.2 percent currently by the end of 2012, according to Leung.

"As a matter of fact, the LPG business is not a marginal business. Rather, it is a volume business. But the robust growth of LPG sales, combined with the profit margin improvement, will definitely help our total revenue," Leung added.

China Daily

(HK Edition 07/09/2010 page3)