FY2018/19ANNUAL RESULTS

(2018.4.1 – 2019.3.31)

2019.06.21

2

Operational Performance• Natural Gas• LPG• Value-added Services

Financial Performance

Future Strategy & Outlook

CONTENTS

3

NATURAL GAS

MANAGEMENTDISCUSSION &

ANALYSIS

New Investments

Acquired 15 additional city concessions in 6 provinces and autonomous regions, as at 31 March 2019, the Group

cumulatively secured a total of 542 piped gas projects with concession rights (including 365 city piped gas projects, 177

township “replacement of coal with gas” projects at county or district levels)

4

Provinces/Autonomous

Regions/Municipalities

Cities/Districts

Acquired 15

additional

city

concessions

Heilongjiang Province Acheng District of Harbin City, Jiguan New District of Jixi City, Wuchang City, Anda City,

Tailai County, Bin County, Zhaoyuan County, Fangzheng County, Jiansanjiang

Inner Mongolia Autonomous

RegionGanqimaodu Industrial Park of Urad Zhong Qi, Dengkou County

Hunan Province Huaihua National Agriculture and Technology Zone

Jiangxi Province Nancheng County

Jilin Province Fuyu City

Hubei Province Chongyang County

Further

increased

shareholdings

in existing

projects

Inner Mongolia Autonomous

RegionIncreased shareholdings in Hohhot city gas project to 63%, turning the project from a JV to

a subsidiary

Liaoning Province Increased shareholdings in Shenyang city gas project to 46.4%; signed strategic cooperation

agreement with the government of Shenyang City to comprehensively promote the use of

natural gas in Shenyang city and its surrounding areas

Natural Gas – Volume Growth

PeriodVolume Growth:

City and Township Projects

2018/19 25.1%

2017/18 39.1%

2016/17 16.2%

PeriodVolume Growth:

Pipelines & Trade

2018/19 44.2%

2017/18 83.2%

2016/17 46.2%

5

12,224.3

18,659.3

24,656.4

8,473.3

11,786.5

14,744.4

3,751.0

6,872.8

9,912.0

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

18,000

19,000

20,000

21,000

22,000

23,000

24,000

25,000

2016/17 2017/18 2018/19

City & Township Projects Pipelines & Trade

Nat

ura

l Gas

Sal

es V

olu

me

(mill

ion

m3

)

Natural Gas – Volume Growth

PeriodVolume Growth:

City and Township Projects

2018/19 25.1%

2017/18 39.1%

2016/17 16.2%

PeriodVolume Growth:

Pipelines & Trade

2018/19 44.2%

2017/18 83.2%

2016/17 46.2%

6

12,224.3

18,659.3

24,656.4

8,473.3

11,786.5

14,744.4

3,751.0

6,872.8

9,912.0

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

18,000

19,000

20,000

21,000

22,000

23,000

24,000

25,000

2016/17 2017/18 2018/19

City & Township Projects Pipelines & Trade

Nat

ura

l Gas

Sal

es V

olu

me

(mill

ion

m3

)

Natural Gas – Customer Breakdown

Customer

% of total

city &

township

gas volume

Volume growth

2018/19 2017/18

Residential 27.0% 29.0% 60.1%

Industrial 47.8% 30.1% 47.3%

Commercial 17.1% 22.5% 23.7%

CNG/LNG

Stations8.1% -2.5% 1.7%

City &townshipgasvolume

Volume Growth

Customer 2018/19 2017/18 2016/17

Pipelines or

Trading44.2% 83.2% 46.2%

Pipeline & trading volume

7

3,751.0

6,872.8

9,912.0 1,203.5

1,223.9

1,193.5

1,661.0

2,054.1

2,516.2

3,679.3

5,419.6

7,050.0

1,929.5

3,088.9

3,984.7

0

2,500

5,000

7,500

10,000

12,500

15,000

17,500

20,000

22,500

25,000

2016/17 2017/18 2018/19

Pipelines & Trade CNG/LNG

Commercial Industrial

Residential

Nat

ura

l gas

sal

es v

olu

me

(mill

ion

m3)

Natural Gas – Effective Connections

Proactively optimising its connection strategy to promote new connections of existing residential buildings, CGH continues to deliver stable new

connections in city gas projects, at the same time, continue to boost its robust growth of new connections in township gas projects. In FY2018/19, the

proportion of existing residential connections over total new connections in city gas projects reached 36%.

8

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

New Residential Connections

3,926,762

Ho

use

ho

lds

0%

5%

10%

15%

20%

25%

30%

35%

40%

Existing Building Connections/Total

Connections in City Projects35%5,107,836 36%

Natural Gas – Customer Breakdown

9

Customer

New Connections (Organic Growth)

Change

from

FY2017/18

FY2017/18

Portfolio

Total

FY2018/19Change from

FY2017/18FY2017/18

FY2018/19

Portfolio

Total

Residential 5,107,836 30.1% 3,926,762 29,678,157

26,137,411

3,540,746

20.8%

11.6%

208.1%

24,570,321

23,421,188

1,149,133

City Projects 2,716,223 -2.2% 2,777,629

RCG* 2,391,613 108.1% 1,149,133

Industrial 2,686 15.9% 2,318 12,407 27.6% 9,721

Commercial 30,673 14.3% 26,829 199,637 18.2% 168,964

CNG/LNG

Stations- - - 575 -0.9% 580

RCG *: “Replacement of coal with gas projects in towns and villages in North China”

10

City Gas Projects

Customer Tariffs (ex-tax) (RMB / m3)FY2018/19 FY2017/18 Change

Residential 2.52 2.40 5.0%

Industrial 2.65 2.50 6.0%

Commercial 2.79 2.60 7.3%

CNG/LNG Stations 2.93 2.63 11.4%

Dollar Margins (ex-tax) (RMB / m3) FY2018/19 1HFY2018/19 FY2017/18

Overall Dollar Margin (city gas projects) 0.61 0.625 0.623

Residential 0.44 0.47 0.51

Industrial 0.59 0.59 0.60

Commercial 0.75 0.82 0.78

CNG/LNG Stations 0.91 0.88 0.75

Natural Gas – Tariff & Dollar Margin

Natural Gas – Other Operational Data

11

FY2018/19 FY2017/18 FY2016/17

Residential

Connection Fee

(RMB per customer)

City Projects 2,508 2,523 2,540

Township Projects 3,010 3,089 -

Urban Population Covered (million) 132.0 123.9 117.1

Household Penetration Rate (City Gas

Projects)60.7% 57.2% 53.1%

12

LIQUEFIEDPETROLEUM

GAS

MANAGEMENTDISCUSSION &

ANALYSIS

LPG – Vertical Integration of the Value Chain

13

CGH Core Business Areas

Upstream

LP

G

Midstream Downstream End Users

LPG Import LPG

receiving

terminals

Storage

facilities

Class II

Stations

Bottling

Stations /

Retail

Points

Industrial

CommercialDomestic

Oil Refinery

CGH Facilities / Customers

Residential

China Gas owns:

8 LPG receiving terminals

300,000 m3 of LPG storage capacity

100 LPG distribution projects and 1,100 retail stores

LPG distribution coverage in 19 provinces in China

Over 300,000 m3 Storage Capacity

8 LPG Terminals (Class 1 & 2)

LPG Fleet Capacity: 12,600 tonnes

100 LPG Distribution Projects

1,100 LPG Retail Stores

2,534,300

2,944,4932,785,350

1,164,700

1,085,9011,208,027

3,699,000

4,030,394 3,993,377

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

FY2016/17 FY2017/18 FY2018/19

wholesale retail

LPG Sales Volume Breakdown (Tons)

LPG – Vertical Integration of the Value Chain

Retail:• A more popular clean energy in townships and villages

where natural gas is not available;• Consolidating retail market through better service,

safety standard and quality of goods;• Owning a national call no. “95007”;

Wholesale: • Demand driven, such as rapid growth of the

petrochemical synthesis and processing sector where LPG is used as a raw material;

• Contractual sales accounts for about 60% of the total wholesale volume, so as to effectively avoid LPG price fluctuation risk;

Further market penetration Economies of scale Fully liberalized market LPG price-setter

FY2018/19Change from

FY2017/18FY2017/18 FY2016/17

Sales Volume (tonnes) 3,993,377 -0.9% 4,030,394 3,699,000

Wholesale 2,785,350 -5.4% 2,944,493 2,534,300

Retail 1,208,027 11.3% 1,085,901 1,164,700

Sales Revenue (HK$’000) 15,917,100 -0.3% 15,969,830 11,654,633

Core net profit attributable to

owners of the Company

(HK$’000)

101,766 -81.5% 550,836 440,388

Core NP Margin (%) 0.6% - 2.8pts 3.4% 3.8%

15

LPG – Vertical Integration of the Value Chain

1. LPG wholesale business recorded a slight year-on-year decrease in sales volume. It was mainly attributable to the control of the

Group appropriately exercised over its LPG imports to prevent the effect of the substantial volatility of international LPG purchase

price on purchase costs and profit.

2. As the crude oil and LPG prices fell sharply in 2018 Q4, causing sales loss for those LPG purchased before the oil price drop,

which was the main reason behind the 81.5% decline in core net profit attributable to the owners of the Company during the

period.

16

17

VALUE-ADDEDSERVICES

MANAGEMENTDISCUSSION &

ANALYSIS

Value-added Services – Asset-light Business

18

Sale and/or delivery of products/services via existing network with 35M+ customers

Gas heaters & kitchen appliances under the brand of Gasbo (中燃宝), such

as gas stoves, disinfection cabinet, range hood, etc.

Smart Home

Comprehensive gas insurance

Sale of water purifier

Sale of air purifier

Gas alarm system

Bottled water

Gas corrugated pipes

Maintenance and equipment conversion services

and more…

Online +

offline

19

Value-added Services – Asset-light Business

Huge PRC market, High margin, Strong growth

Performance (HK$ millions)

Revenue & profit continue to grow at high double-digit in years

Value-added Services

Blue

Ocean

Value-added services FY18/19Change from

FY17/18FY17/18

Revenue 3,903.1 32.5% 2,946.7

Gross profit 1,421.0 42.0% 1,000.6

GP margin 36.4% 34.0%

Operating profit 1,144.5 47.8% 774.5

OP margin 29.3% 26.3%

20

FINANCIAL PERFORMANCE

Income Statement

HK$ (millions) FY2018/19 % change FY2017/18

Revenue 59,386.1 +12.4% 52,832.0

Gas sales 27,105.7 +19.9% 22,612.9

Connection fees 11,179.3 +25.3% 8,923.7

LPG sales 15,917.1 -0.3% 15,969.8

Value-added services 3,903.1 +32.5% 2,946.7

Construction design and services 1,280.9 -46.2% 2,378.9

Gross profit 14,059.2 +20.5% 11,671.0

EBIT 11,634.1 +20.3% 9,674.4

One-off or non-operational items 73.1 - 266.9

Profit attributable to owners of the Company 8,224.4 +34.9% 6,095.2

EPS - Basic (HK dollars) 1.63 +32.5% 1.23

Core net profit attributable to owners of the Company * 8,151.3* +28.1%* 6,362.0

Dividend per share (HK cents) (full year) 44.0 +25.7% 35.0

Dividend payout ratio (core) 28.0% + 0.7pts 27.3%

21

* The growth of Core profit attributable to owners of the Company would have increased by more than 28.1% if RMB vs. USD/HK$

didn’t drop by more than 6.3% during this FY2018/19.

22

ItemsHK$

millionsRemarks

1Exchange gain/loss (150.3)

Foreign debt proportion remained at low level of 14.7% as at

31 March 2019

2 Gain or loss on disposal of

associate/JV/PPE/others445.7

For instance: increased shares in a JV (Hohhot city gas project)

from 51% to 63%, which becomes a subsidiary

3 Share of ex loss & option expense

attributable to ZY Gas (associate,

41.81% of shares)

(159.2)

4 Share based payments (options) (63.1) Fully booked

Total amount 73.1

One-off / non-operational items

Change of Currencies

23

1.247

1.168

1.12

1.14

1.16

1.18

1.2

1.22

1.24

1.26

29/3/2018 29/03/2019

Historical exchange rate

RMB ：HKD

source： http://www.hkexchangerate.com

HK$(millions) FY18/19 FY17/18 FY16/17

Total Assets 109,879.7 82,058.0 60,221.8

Total Equity 40,782.4 32,730.1 23,946.6

Shareholder's Equity 35,321.1 28,456.0 20,550.2

Cash 13,482.3 8,537.0 5,242.3

Short-term Bank and Other Borrowings 16,407.5 11,079.3 10,873.3

of which LPG trade finance related facilities 2,240.6 3,614.1 -

Long-term Bank and Other Borrowings 21,491.4 21,293.1 12,745.2

Net Gearing Ratio * 54% 62% 77%

24

Balance Sheet

* Excluding the LPG import letter of credit related trade finance

25

FY2018/19 FY2017/18

Operating profit margin 16.9% 15.5%

Sales of gas 11.0% 10.9%

Gas connection 30.8% 32.7%

Construction design and services 16.5% 17.2%

LPG sales 0.8% 3.2%

Value-added services 29.3% 26.3%

Operating Profit Margins

26

Financial Highlights

* Net of one-off or non-operational items

0.160.22

0.39

0.5

0.66

0.75

0.91

1.28

1.61

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

HK

$

Core EPS*

2.23.92

8.48

12.06

16.15

19.46

25

35

44

0

5

10

15

20

25

30

35

40

45

HK

Cen

ts

DPS

27

FUTURE STRATEGY & OUTLOOK

Future Strategy

28

Continue to add 10-20 new city concessions in each year

Speed up connections to old/existing residential buildings to increase penetration rate

Strong volume driver: “coal to gas” conversion for industrial and commercial users

Huge new market for winter heating application: replacement of coal with gas for residential

users in towns and villages in 15 provinces in northern China

Develop the enormous value-added services’ market for more than 35 million existing

customers, increasing by 5 million annually

Vertically integrate LPG value chain and boost LPG assets’ utilization rate

Explore new businesses, such as, Distributed Energy, Gas Co-generation, Electric Charging

Posts and Electricity Distribution etc.

Township “coal-to-gas” for heating

29

Established strategic partnerships with Tianjin city, Hebei, Shandong, Shanxi, Henan, Shaanxi, Anhui, Yunnan,

Hainan, Heilongjiang, Hubei, Jilin, Guizhou, Sichuan and Hunan provinces respectively, and implemented projects,

in more than 177 counties or districts, such as “replacement of coal with gas” in towns and villages, conversion of

coal-fired boilers to natural-gas-fed in urban areas, natural gas for vehicles, distributed energy resources, natural gas

storage facilities and the construction of natural gas pipeline networks and “beautiful countryside”.

As at 31st March 2019, China Gas has signed contracts to replace coal with natural gas for more than 7 million

households in towns/villages, including the 3.54 million households for which the connection works have been

completed by March 2019.

Replacement of coal with natural gas projects in towns and villages will contribute to the Group:

1. A substantial increase in new residential connections, on top of the annual residential connections in 365

existing city gas projects.

2. Continuously grow value-added business by selling wall-hanging gas heaters and kitchen appliances.

3. Replacement of coal with natural gas projects in towns and villages is mainly for winter heating purpose, the

average gas consumption per household for heating in winter is about 10 times of the usage by urban

household, thus, it will bring substantial growth in natural gas sales in the future.

Outlook

30

Segment

FY2018/1

9

(Actual)

FY2019/20 FY2020/21

Gas volume in city & township projects 25.1% 25+% p.a.

Annual residential connections (households) 5,107,836 5,500,000 6,300,000

Sale tonnage of LPG (tons) 3,993,377 4,300,000 5,000,000

Gross profit of value-added service 42.0% 40+% p.a.

The Board proposes to seek the approval of the Shareholders on the refreshment of the Scheme Mandate Limit, in

order to enable the Company to provide more rewards and motivation to its employees and other eligible persons

under the Share Option Scheme for their contribution and continuing efforts to promote the interest of the

Company and enhance the value of the Shares.

Conditions intended to be attached to the New Options to be granted under the Scheme Mandate Limit, if

refreshed:

i. the Group’s audited net profit after tax (before share-based payment expenses) and

deduction of net profit after tax attributable to non-controlling interests for any of the

financial years ending on or before 31 March 2022 based on the audited consolidated

financial statements of the Company amounts to HK$ 14 billion or above; or

ii. if the above condition is not fulfilled, the New Options can still be exercised if the

Group’s audited profit after tax (before share-based payment expenses) and deduction

of net profit after tax attributable to non-controlling interests for the financial year

ending 31 March 2023 based on the audited consolidated financial statements of the

Company amounts to HK$15 billion or above; and

the New Options will lapse if none of the above conditions is satisfied.

31

Conditions intended to be attached to the New Options to be granted

REFERENCE DOCUMENTS

32

•issued by the Ministry of Environmental Protection in collaboration with the People's Governments of Beijing, Tianjin and Hebei in June 2016

•promotion of "gas for coal replacement" campaign, designation of coal-free areas

•dedicated funding from central government

"Reinforced Measures on Air Pollution Prevention and Control in Beijing-Tianjin-Hebei (2016-2017)"

•issued by the Ministry of Finance and Ministry of Environmental Protection in July 2016

•strengthen the use of special funds for “air pollution prevention and control”

"Measures for the Administration of Special Funds for Air Pollution Prevention andControl"

•issued by the People's Government of Hebei in August 2016

"Implementation Plan for the Reinforced Measures on Air Pollution Prevention andControl in Hebei (2016-2017)"

•issued by 4 ministries in collaboration with People's Governments of six provinces and municipalities in NorthernChina in February 2017

•number of "pollution diffusion belt cities" raised to 28

•shut down of heavily polluting factories in winter

"2017 Work Plan on Air Pollution Prevention and Control in Beijing-Tianjin-Hebeiand the Surrounding Areas"

33

Environmental Protection Policies

34

•issued by 4 ministries in collaboration in May 2017

•support for pilot projects on clean winter heating with central finance

•3 years demonstration period. Financial subsidy by the central government according to the scale of the city: 1billion each year for municipalities, 700 million each year for provincial capital cities, and 500 million each year forprefecture-level cities.

"Circular of the Central Government on Piloting Winter Cleaning and Heating inNorthern China"

•issued by 10 ministries in collaboration with People's Governments of six provinces and municipalities in NorthernChina in August 2017

•supervision of “air pollution comprehensive management” work done by the 28 “pollution diffusion belt cities”

"Priority Working Plan for Comprehensive Management of Air Pollution duringFall and Winter of 2017-2018 in Beijing-Tianjin-Hebei and its Surrounding Areas"

•Issued by 10 ministries in collaboration in December 2017

•Includes all 15 provinces in north China

•by 2021: 70% clean heating coverage in north China, replacing 150 MTs of coal; comprehensive clean heatingcoverage in “2+26” cities and abolition of all boilers under 35 tons; 80% clean heating coverage in counties andcity suburbs and abolition of all boilers under 20 tons; 60% clean heating coverage in rural area

“Clean Winter Heating Plan for North China (2017-2021)"

•issued by the State Council, highest profile document for air pollution control

•Extending air pollution control from “2+26” to the Yangtze River Delta and Fenhe-Weihe Plain

•Incremental gas will prioritize residential use and winter heating in areas with severe air pollution; prioritizingBeijing-Tianjin-Hebei and its surrounding area and Fenhe-Weihe Plain in order to realize “the replacement of coalwith gas”

“Three Year Action Plan for Winning the Battle for Blue Sky"

Environmental Protection Policies

Subsidies for "coal to gas replacement", in Hebei Province：

Residential users:

Installation subsidy, RMB 4,000/household. Provincial government bears RMB 1,000, city and county

governments bear the rest RMB 3,000

Equipment purchase subsidy

70% reimbursement of purchase of wall-mounted heaters, up to RMB 2,700

Gas subsidy in winter

RMB 0.8/cubic meter subsidy for winter heating purpose, up to RMB 960 per year, for 3 years

Industrial users:

Subsidy of RMB 100,000 per steam ton for retrofitting coal-fired boilers to gas-fired boilers

35

Subsidy Policies for Township

Disclaimer & Contact

Disclaimer:

Statements in this presentation and handout that are not strictly historical are “forward-looking” statements. Forward-lookingstatements involve risks and uncertainties, including, but not limited to, continued acceptance of the Company’s product andservices in the marketplace, competitive factors, new products and technology changes, the Company’s dependence upon thirdparty suppliers and other risks detailed from time to time in the presentation, handout and other related documents. All thedirectors of China Gas jointly and severally accept full responsibility for the accuracy of the information contained in thesematerials and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in thesematerials have been arrived at after due and careful consideration and there are no other facts not contained in these materials,the omission of which would make any statement in these materials misleading. The materials and information in thepresentations and other documents are for informational purposes only, and are not an offer or solicitation for the purchase orsale of any securities or financial instruments or to provide any investment service or investment advice.

For investor enquires:

Mr. Frank Li

Tel: +852 2238 0315 l Fax: +852 2287 0633

Email: frank@chinagasholdings.com.hk

Website: www.chinagasholdings.com.hk

36