Citigroup Initiates Coverage on ENN ENERGY with a Buy Rating, Assigns Neutral to CHINA RES GAS, Expresses Caution on China's Natural Gas Distribution Sector

According to a research report, Citigroup has issued a cautious outlook on China's natural gas distribution sector, citing limited growth expectations for sales volume in 2026.

Industry sources indicate that China's natural gas consumption in May, which includes flows into and out of storage facilities, decreased by 3.5% year-on-year to 30.66 billion cubic meters. The breakdown includes: 12.6 billion cubic meters (41.0%) used for industrial fuel; 7.9 billion cubic meters (25.8%) for power generation; and 3.4 billion cubic meters (10.9%) for city gas distribution.

On the industrial front, China's Purchasing Managers' Index (PMI) for May was 50.0%, down 0.3 percentage points from the previous quarter, while the production index stood at 51.2%, remaining above the expansion-contraction threshold. Natural gas usage at domestic semiconductor fabrication plants has shown stable growth.

For gas used in power generation for air conditioning, demand in southern China, particularly in Guangdong, exceeded expectations due to an earlier-than-usual onset of summer temperatures.

Within this context, Citigroup has initiated coverage on ENN ENERGY (HKEX: 02688) with a "Buy" investment rating, primarily based on the upside potential from its privatization process.

Concurrently, the bank has assigned a "Neutral" investment rating to CHINA RES GAS (HKEX: 01193).