IPO Pricing | Huzhou Gas received 8.08 times subscription, priced at 6.08 Hong Kong dollars per share.

Futu News on July 12th announced that on Tuesday this week...$HUZHOU GAS (06661.HK)$Announcement: The company issued 50 million shares priced at 6.08 Hong Kong dollars per share, in lots of 500 shares, expected to be listed on July 13th.

During the public offering phase, Huzhou Gas received 8.08 times subscription, with the final number of shares allocated for public offering being 5 million shares, representing approximately 10% of the total shares offered (before any exercise of the over-allotment option). A total of 10,630 valid applications were received, with a single winning rate of 15.01%.

In addition, the international offering was oversubscribed, with the final number of shares offered being 45 million shares, equivalent to about 90% of the total shares offered (before any exercise of the over-allotment option). Futu News has compiled the relevant data in the table below:

The company plans to use the net proceeds from the global offering of approximately 0.26 billion Hong Kong dollars for the following purposes: about 20.0% for upgrading the company's pipeline network and operating facilities to increase pipeline natural gas sales; about 30% for strategically acquiring to expand the company's business to other regions; about 30% for expanding into distributed photovoltaic power generation business, about 10% for promoting the use of steam generated by the company's natural gas through natural gas boilers for heat energy; about 10% for working capital and general company purposes.

The main business of Huzhou Gas includes selling gas under franchise rights, mainly pipeline natural gas; providing construction and installation services to developers, residents, and non-residential property owners or residents to build and install end-user pipeline networks and gas facilities; and selling household gas appliances.

According to the Frost & Sullivan report, in 2021, the company is the largest pipeline natural gas distributor in Huzhou City, a major prefectural-level city in Zhejiang Province, China, with a market share of 44.1% in Huzhou and the fifth largest pipeline natural gas distributor in the Province, with a market share of 3.0% in Zhejiang, based on sales volume.

In terms of finance, in the fiscal years 2019-2021, the company's revenues were RMB 1.63 billion, RMB 1.422 billion, and RMB 1.859 billion respectively; while the net profits for the same period were RMB 0.144 billion, RMB 0.192 billion, and RMB 0.167 billion respectively.

In the industry aspect, influenced by the continuous promotion of coal-to-gas conversion in China and the extensive use of natural gas, the consumption of natural gas in Zhejiang Province has steadily increased. It has grown from 10.5 billion cubic meters in 2017 at a compound annual growth rate of 14.4% to 18 billion cubic meters in 2021. It is expected to increase from 20.7 billion cubic meters in 2022 at a compound annual growth rate of 14.2% to 25.3 billion cubic meters in 2026.

The natural gas consumption in Huzhou City increased from 0.71 billion cubic meters in 2017 at a compound annual growth rate of 15% to 1.24 billion cubic meters in 2021. It is expected to increase from 1.42 billion cubic meters in 2022 to 2.45 billion cubic meters in 2026, with a compound annual growth rate of approximately 14.6%, higher than the growth rate of Zhejiang Province.

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