Fair-Value Report — JiaXing Gas Group (9908.HK)

Insider Signal

Verified Snapshot

Share structure: Total issued shares: 137,844,500 (par RMB 1.00 each). Domestic shares (内資股, unlisted): 100,000,000 (72.5%). H-shares (HKEX listed, traded in HKD): 37,844,500 (27.5%). The DI percentage (6.59% → 8.97%) is calculated against the H-share class of 37,844,500 shares. LIU SONG holds 3,395,500 H-shares = 2.46% of total shares.

Business Description

JiaXing Gas Group is the sole franchised city-gas distributor in Jiaxing, Zhejiang Province — one of China's wealthiest tier-3 cities (GDP ~RMB 800B, population ~6M, on the Shanghai–Hangzhou corridor). The company distributes piped natural gas (PNG) to residential, commercial and industrial users and sells liquefied natural gas (LNG) via its 51%-owned joint-venture subsidiary 杭嘉鑫 (Hangjiaoxin Clean Energy).

Revenue mix (FY2025): Piped gas sales RMB 1,707M (55%), LNG-related ~RMB 1,298M (42%), construction services RMB 116M (4%). The PNG segment is the structural backbone — regulated, predictable, and volume-growing (+0.75% in FY2025). The LNG trading segment has high revenue but thin and volatile margins tied to international LNG spot prices.

Shareholders: The company has a dual-shareholder base. The controlling domestic shareholder is 嘉興市城市發展投資集團 (Jiaxing City Development Investment Group, state-owned), providing regulatory stability. Significant H-share holders include Flat Glass HK (16.51% of H-shares), a related entity controlling 16.07%, Mingyuan Group Investment (14%), and ENN Energy (new奧能源). LIU SONG is now the fourth-largest disclosed H-share holder at 8.97%.

Valuation

Method: Peer Multiple (P/E and P/B) + Three-Scenario DCF Checks

JiaXing Gas is a profitable, capital-intensive regulated utility. A DCF is the primary tool, benchmarked against peer multiples. No FCF-DCF (capex is lumpy and concession-tied). The LNG volatility means headline revenue/gross profit is noisy — net profit is the cleanest earnings anchor.

Key assumptions: WACC 9.5% (risk-free 3.5%, ERP 6.0%, beta 0.80 for small local utility); terminal growth 2.5%; RMB/HKD 1.08 (approximate mid-rate July 2026).

Base-case assumptions: FY2026E net profit RMB 158M (+5% from FY2025 RMB 150.7M trough), applying 8.0x P/E — a modest discount to mid-size Zhejiang peers (Huzhou Gas 8.3x, China Resources Gas 9.6x, ENN Energy 12.2x) reflecting JiaXing's smaller scale, lower H-share liquidity and LNG concentration risk. At 8x FY2025 trailing EPS gives HKD 9.44.

Reverse read: At HKD 8.48, the market implies P/E of 6.7x on FY2025 earnings — pricing in continued earnings erosion of roughly 10-15% per year, or a terminal cost of equity above 13%. Given the net cash balance sheet, ROE of 11.7%, and 5.3% dividend yield, this strike price appears to build in excessive pessimism. The current price discounts the bear scenario within a 20% margin.

P/B Cross-Check

Book value per share: RMB 9.35 (= HKD 10.10). ROE 11.7%. If we assume a cost of equity of 10.5%, justified P/B = 11.7%/10.5% = 1.11x → fair value HKD 11.21. Current P/B of 0.84x implies the market expects ROE to erode to ~8.8%. This is plausible if LNG margins remain depressed but appears overly pessimistic for the PNG franchise alone. P/B analysis supports a range of HKD 9.50–11.00.

Peer Comparison Table

Peer P/E from Google Finance / Stockopedia / Simply Wall St as of late-July 2026 (approximate). JiaXing trades at a 19% discount to closest comp Huzhou Gas and a 31% discount to the China mid-cap gas average, even adjusting for its H-share premium.

Conclusion

Rating: Speculative Buy. The signal is genuine — LIU SONG (柳松), an individual beneficial owner with no director ties or concert-party links, purchased 900,000 H-shares on the open market on 29 July 2026, adding HKD 7.83M at HKD 8.70/share to an already-substantial 6.59% position. They now hold 8.97% of the H-share class. This is the most credible DI signal type (reason 1101, no nominee structure, incremental accumulation by existing holder).

Fundamentally, JiaXing Gas is a textbook monopoly franchise (single-city PNG distributor, state-backed anchor shareholder) trading at a meaningful discount to book and peers. The 6.7x trailing P/E and 5.3% dividend yield are attractive for a utility with net cash on the balance sheet. The PNG segment (55% of revenue) continues growing volumes in an industrialising Zhejiang city.

The key risk is the LNG segment, where gross profit collapsed 41% in FY2025 due to market-wide spread compression. This is partly structural — the days of wide international LNG spread arbitrage for Chinese city-gas distributors are over. However, the annual report's new agency-service model for LNG should reduce both revenue and risk volatility going forward; it also means headline revenue decline overstates the quality deterioration.

At HKD 8.48 vs a base fair value of HKD 9.94 (base case) and probability-weighted HKD 9.61 (~+13% to +17%), the risk-reward is positive but not compelling for most investors given the very low H-share liquidity (33K shares/day avg). This is best suited to patient, small-position investors who can handle illiquidity. LIU SONG's purchase itself is the most meaningful near-term signal — if a large external holder is adding at these levels, the floor may be near.

Key Risks

• LNG structural compression: If the LNG agency-service model fully eliminates principal trading, FY2026 revenue may fall further even as net margins stabilise.
• H-share liquidity: Average daily volume of only ~33,000 H-shares (HKD ~280K/day) makes exit difficult for any meaningful position.
• LIU SONG identity opaque: No public profile found; investment thesis unknown. Could be a financial speculator, a family office, or a strategic industrial buyer — motive cannot be verified.
• Concentration risk: All revenue from Jiaxing municipality. Municipal gas policy changes (tariff resets, pipeline network transfer to city grid) could affect earnings.
• Long-term electrification: China's decarbonisation drive may slow residential and commercial gas uptake beyond the 5-year horizon.
• RMB/HKD FX: Earnings in RMB; report in HKD. Any meaningful RMB depreciation reduces HKD returns.
• Controlling shareholder influence: State-owned city development group as major domestic shareholder may prioritise policy goals (e.g. lower gas tariffs, infrastructure transfers) over minority shareholders.

Sources

• HKEX DI Filing IS20260730E00062 — LIU SONG / JiaXing Gas H Shares (filed 30 Jul 2026)
• JiaXing Gas Group Annual Report 2025 (year ended 31 Dec 2025), published HKEX / Futunn, April 2026
• Google Finance 9908:HKG — price HKD 8.48 as of 31 Jul 2026, 09:40 HKT; total assets CNY 3.52B; cash CNY 750M
• Stockopedia HKG:9908 — shares outstanding 137,844,500; P/B 0.82; ROE 12.79%; dividend yield 5.56%
• Longbridge 9908.HK — FY2025 net profit RMB 151M (–19.7%); H1 2025 net profit RMB 75.3M (–15.49%)
• Stockopedia HKG:6661 (Huzhou Gas) — P/E 8.3x; mkt cap CNY 922M (peer comp)
• Simply Wall St / Yahoo Finance — ENN Energy P/E 12.2x; China Resources Gas P/E 9.6x
• HKEX DI log internal scanner, 29 Jul 2026