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Q3-2024 Earnings Call
AI Summary
Earnings Call on Oct 25, 2024
Retail Gas Growth: Retail gas sales volume rose 4.8% year-over-year for the first three quarters, reaching 18.819 billion cubic meters.
Integrated Energy Expansion: Integrated energy sales volume increased 21.4% year-over-year to 29,668 million kilowatt hours, in line with annual growth guidance.
Dollar Margin Stability: Dollar margin was maintained at $0.54 for the first three quarters, with management aiming to preserve this level through year-end.
C&I Customer Recovery: Gas sales to commercial and industrial (C&I) customers grew 5.7% year-over-year, reflecting a recovery in demand.
Value-Added Business: Value-added business reached over 4.26 million customers, with smart home and kitchen equipment sales volume up around 8%.
LNG Trading: LNG trading revenue reached approximately RMB 280 million before tax, on track with the RMB 300 million annual guidance.
Cost Pass-Through Success: 80% of projects are covered by cost pass-through mechanisms, helping to manage procurement costs despite regional differences.
Guidance Confidence: Management reiterated confidence in meeting full-year growth and margin guidance across segments.
Retail gas sales volume continued to grow, increasing by 4.8% year-over-year in the first three quarters. Both residential and C&I customer segments contributed to this growth, with C&I sales growing faster at 5.7%. Management cited improved customer engagement and a recovery in demand, though noted regional differences and sector-specific headwinds, especially in property-related customers.
The integrated energy (IE) business delivered a 21.4% year-over-year growth in sales volume, reaching 29,668 million kilowatt hours. Management attributed this to strong fundamentals, new customer acquisition, and product diversification in areas like energy storage and PV. There was an acknowledgment of seasonal slowdowns in the third quarter but confidence in meeting the annual guidance for the segment.
Dollar margin held steady at $0.54 in the first three quarters. Management explained that pricing adjustments, diversified LNG procurement, and upstream supplier negotiations supported this margin. They expect to maintain this level for the full year, though noted that margins tend to be seasonally lower in winter. ASP (average selling price) declined by $0.10 year-over-year in Q3, but better procurement and operational strategies offset this, resulting in a higher dollar margin.
About 80% of projects are covered by cost pass-through mechanisms, which has helped ENN manage procurement cost fluctuations. Management noted limited changes in procurement costs and ASP compared to prior periods, but highlighted the importance of region-specific flexibility in implementing cost pass-through. Price hikes in winter are expected to be moderate and manageable.
Value-added business expanded its reach to over 4.26 million customers, with a year-on-year increase of 25,000 customers. Sales and shipment of smart home and kitchen-related products grew by about 8%. Management is optimistic about further growth in this segment, driven by product innovation and increased customer penetration.
LNG trading revenue was around RMB 280 million before tax, close to the RMB 300 million yearly target. Last year's revenue in this segment was significantly higher, at nearly RMB 1.5 billion, but management considers this business more volatile and not core to ENN's long-term growth, which is focused on retail gas and integrated energy.
CapEx for integrated energy remains ample and is flexibly allocated among subsegments depending on opportunities and needs. Actual CapEx spending in 2024 is lower than the initial goal of $8 billion, and management is considering various options for the unused funds, including share repurchases or investments in growth areas, pending board approval. Management reaffirmed confidence in meeting annual guidance across all major business lines.
Ladies and gentlemen, good evening. Welcome to the Conference Call with ENN Energy, Pierre Lau is the moderator for today. Over to you, Pierre.
Good evening, thank you for taking time out of your busy schedule to join the conference of ENN Energy. This is Pierre Lau, China Equity Strategy; and Asia Head of the Clean Energy and Utility Research of Citi Group. ENN Energy has already reviewed the operation data for the third quarter of 2024. We are very honored to have 7 representatives of the management of ENN Energy and first, Mr. Zhang, CEO; and also the Executive President, Mr. Liu; and also, Mr. Wang, CFO; and also the VP, [ Mr. Cheung ]; and [ Mr. Huang ], the Assistant to the President; and also Ms. Karen Liu, Chief Director of the IR and ESG; and also Ms. [indiscernible], Deputy Head of the IR. The management will walk us through the latest operation data of the first quarter of 2024. Now I would like to hand over to Ms. Zhang to share with us the business review of the third quarter of 2024. If you have not received the briefing and the PPT of the Q3 performance, please send me your email, then I will forward the PPT to you.
Now I would like to hand over to the management to talk about the operational highlights of the third quarter.
Respected investors, analysts and dear corporation partners. Good evening. Welcome to the Q3 2024 Conference Call of ENN Energy. This is [indiscernible], the Deputy Head of the IR. Now I would like to report to you the performance of ENN Energy in the first 3 quarters of this year. For the first 3 quarters' performance, the data has been in alignment with our annual guidance, which well demonstrated our commitment and our achievements. In terms of the double carbon goal and also the carbon neutrality and also the carbon reduction emission, we have well addressed the needs of the natural gas and also different gas of the renewable energy sector. ENN Energy has well adjusted different kinds of new opportunities by capture the fundamentals, which are solid for our company and have achieved very good growth.
In the first 3 quarters of this year, our retail gas sales volume increased by 4.8% to 18.819 billion cubic meters and also the sales volume of gas to the C&I customers recorded a growth of 5.7% to 14.843 billion cubic meters and the gas sales to residential customers increased by 3.4% year-on-year to 3.748 cubic meters and the group's installed designed daily capacity for newly developed C&I customer reached 11.133 million cubic meters.
In the first 3 quarters, we have achieved a dollar margin of RMB 0.54, and we'll continue with our endeavor in the fourth quarter by our continuous development in the integrated energy segment and also the value-added business to achieve our guidance.
According to the accumulated operating data in October, our growth in October is expected to reach 6%. Our new connection business has also been [ scaling ] new heights. In the first 3 quarters of this year, we have achieved a very high connection number and also the value-added business reached up to over 4.26 million existing customers, resulting in an increase of 25,000 year-on-year. We have maintained very good services to the -- providing to the customer, and we have reduced high efficiency in our overall management. In the first 3 quarters, we have ceased all the market-oriented opportunities and try to be deeply engaged in providing more services to the 2B customers like the industrial park and also the other types of the [ Cytec Park ], et cetera, and other kinds of the campus and also the 2B environment. We have reached very good development, integration from low source green and storage.
In the first 3 quarters, we have achieved very good developments in the integrated energy business and also in terms of the integrated energy, the sales volume has increased by 21.4% on a year-on-year comparison, reaching 29,668 million kilowatt hours. For our other business like smart home business and also value-added business, we have widened our product portfolio relating to the intelligent products and also the other kinds of the highly digitalized products. We have also other kinds of the engagement in the renewable sectors like those kind of [ ES ] and also the [ TV-related ]segment, et cetera, which also generate higher number of the power generation, reaching a higher number of the kilowatt hours.
At the same time, we have well improved our comprehensive competitiveness with our further development. It is expected that the integrated energy segment is going to achieve new high. In terms of our value-added business, we have now more than 30 million gas household customers, and we have increased the number of the penetration rate of our -- of the existing customers, we aim to achieve faster development with better quality.
In the first 3 quarters, we have our value-added business reached out to over 4.26 million existing customers. And also in terms of this kind of selling of the intelligent cooking utensils or cooking equipment on different types of the kitchenware, the sales volume and the shipment volume has increased by around 8%, and these are very important value-added business segment.
We try to widen the section of the customers' profiling. We try to seize all these opportunities and to capture those opportunities in each of the niche segments to launch more attractive products and solutions to better cater the needs of the customer to increase their convenience for their life and also to empower their daily life, was from our listed entity with the stock to [ 6AA ]. Our development model has been conducted on a trajectory of increase the value-added business offering to the customer, both to the 2B business and 2C customers. We have increased our synergy in the natural retail gas business and also value-added business and also the integrated energy business. We have achieved very good synergy among the 3 major business segments with our concerted effort from the top to the bottom, we are very confident to achieve the annual guidance.
Last but not the least, I would like to thank you for your continued support and endorsement for ENN Energy. We will spare no effort and keep check on the development of the utilization of the renewable energy. Thank you for your listening. Thank you for your time. We are very happy to answer your questions. Thank you.
[Operator Instructions] Before we take the questions from the investors, here are some questions from the moderator. The first question about the integrated energy business. For the IE business, in terms of the sales in the first 3 quarters of this year, the increased margin was 21.4%. You think that compared with the previous year or compared with the first half of this year, and it seems that the growth rate of the IE business seems to be slowing down. So what is your assumption of the growth rate of the integrated energy business for the fourth quarter? How can you achieve the annual guidance for the growth rate of the IE segment in a relatively slowing down development rate of the integrated energy segment. What will be your coping measure?
We are waiting for the management to answer.
Thank you for your question, Pierre. In the first quarter, compared with the first 2 quarters, there has been lower growth rate of the IE segment. It is due to seasonality because in the [ third ] quarter, some of the business or subsegments under the integrated energy are under the off-season, they have been showing some of the downward trend. That means for some of the subsegments of the IE, traditionally, the Q3 is the off-season for those kind of subsegments. So that is the first reason.
The second reason is that for the other kinds of the segments under the IE there are different types of the arrangement relating to the power generation and also the energy storage as the subsegments under the integrated energy and they also present different kinds of the gross margin. However, for the majority of the subsegment for the highest-growing segments under the IE 6% higher gross margin than the other subsegments of integrated energy segment. So that is why you can see some of the variable development rate or growth rate of the IE business in the first 3 quarters.
I want to ask a further question relating to dollar margin. Just now you mentioned $0.54 has been the dollar margin in the first 3 quarters. I would like to ask what is your outlook for the dollar margin in the fourth quarter? And what are the key influential factors for the existing maintenance of the dollar margin?
Thank you, Pierre, for your questions. I think this question is very important. It is also a common concern among majority of the investors. In the first 3 quarters, we have a relatively satisfactory maintenance of the dollar margin, combining our development in the natural gas business and other kinds of the business, including our diversification relating to the procurement of the LNG from the upstream suppliers. For this year, we have also made some of the pricing adjustment and also there have been adjustments relating to the LNG supply from the overall supply market.
And in all those kind of variable reasons, and we have maintaining the dollar margin for the first 3 quarters at a level of 54 points -- $0.54 for the whole year, we would like to maintain around 10% of growth for our retail gas volume for the whole year.
We have the first question from the line is an investor, [ Sung-Jen Yen ] from [ CMBI ]. We are waiting for the management line to have the questions to be raised. [Operator Instructions]
Management, good evening. This is [ Sung Yen ], the [ CNBI ]. I have one question for the management. The question is about the C&I customers business expansion compared with last year, there has been minor moderation or reduction for the C&I customer. And this year, there has been recovery in both the gas sales volume to the residential customers and also C&I customers. I would like to ask the momentum for the recovery and also the business to the power plant, especially different types of the power plants like those kind of pick-shipping power plants? And what is your outlook in the business we can read to the 2B business for the C&I customers?
Thank you for your question. In the overall C&I customer, we have been adopting diversified and very flexible strategy to strengthen our communication with the customer and also we proceed from the actual needs from the customer and have taken multiple measures in coping with those kind of differentiated demand. We try to provide more added value to them. We are also diversifying the gas supply to us. That is why in any of those kind of tailwinds, we have well increased the number of the connection to the newly developed customer, especially the C&I customer. So that is why we have also realized the growth of the natural gas sales to the C&I customer by 5.7% in the first 3 quarters of this year.
We are going to further tighten our communication and maintain high frequency discussion with our customer to keep closer with the customer and to further reinforce our core operation relationship with the customer to maintain our further growth. At the same time, we are also deeply aware that there are other kinds of the SME players among the C&I customers. For the medium, small and micro business, we believe those kind of 2B customers are very prospective. At the same time, we are eying for more opportunities in those regards. Regarding for the 2B customer, like the power plant customer, they actually are bigger in terms of the overall operations size, we try to deliver the best-in-class and top-quality services to them. We have been maintaining very good relationship with the power plant customers.
However, we believe that the number of the power plant customers can have a further potential growth in terms of the overall number for the acquisition and also the retention of the customer. This will be a very important driver for our sustainable growth.
[Operator Instructions] The next question is from [indiscernible] of HSBC. Could you be closer to the microphone, dear investor?
Thank you, management, for the opportunity. I have 2 questions. The first question regarding for the dollar margin in the first 3 quarters, $0.54 which is in line with the whole year's guidance. So do you think that in the fourth quarter, you can achieve [ RMB 0.54 ] of dollar margin. But traditionally speaking, dollar margin will be a little bit lower than the first 3 quarters in winter. So what is your take on that?
The second question is, since that in the third quarter, the natural gas sales volume to the C&I customers has been presenting a lower growth rate than the growth rate in the second quarter. Could you explain the rationale behind which subsegment is the checker, the commercial sector or the industrial customer? So what is your outlook for the natural gas sales volume to the C&I customer in the fourth quarter?
Thank you for your questions. I would like to take your questions. Since we are cooperating with some major key players like those key e-commerce players, and these are also very important players in different types of the major 2B segment. And for example, we have been cooperating with one major e-commerce player, and we have also arranged some of the details in this cooperation. And in those kind of cooperation because the business volume with that customer is very huge. And also there has been certain impact to this kind of overall gas sales volume and also the growth rate of the natural gas sales volume to the C&I customer recently.
In terms of those kinds of price spreads, we have been doing what we can and take multiple measures to strike a better balance among different types of influential factors like the major petrol suppliers, like the 3 major big oils. That is why we have been maintaining a very good relationship with the upstream suppliers, and also, we are also in active communication with the major 2B customers. So that is why it is due to the changes of their own business operations and the reshuffling of the operation strategy. It is quite normal that this will exert some of the impact to the business volume with them.
In terms of the winter season, you have been mentioning -- you mentioned that it is traditionally the season in the fourth quarter that we witness a lower dollar margin than the previous quarter. I think that even in some of the headwinds, we are trying our best to go with those kind of headwinds because we have very good fundamentals. And also, we are maintaining the current momentum.
I would like to add some point to your second question. In the third quarter, in terms of the growth of the natural gas sales volume, the growth rate has been lower than the growth rate in the second quarter. Here is the rationale as it is now to all in the coastal region, like in Guangdong, [ Kuang-tung ] province.
It is mainly jacked by the property sector, the last recovery in the property sector. So there has been some of the overhaul and some of the suspension of the operation of some of the 2B customers or some of the C&I customers. So that is why this kind of customer have been the suppliers for the property sector due to the shortage of the recovery momentum for the property sector. And that is why they are also suffering certain kinds of the shortage of the demand or a lesser demand scenario. That is why our business will also have some influence from this kind of 2B or C&I customer. But for the whole year, we are also very confident that we can achieve the growth of the sales volume to the C&I customer by around 5%.
The next question is from [indiscernible].
I have 3 questions. The first question, in terms of the procurement price in winter, what is the price hike? And how much is this kind of price hike coverage out of your total contracts volume? And also in terms of the demand outlook in the coming winter, what is your outlook for the demand in the coming heat supply season? And what keeps your prospect for the gross margin? And for your share repurchase and what is the current development? I think these are also the common concern of a lot of investors about the share buyback.
For the gas price in the coming winter, it is also influenced by the policies that are overriding the upstream and also other kinds of the influential factors compared with last year, I think the pricing mechanism is friendly to us at the time being at the unit price of around USD 75. And there is a minor change of around USD 2.9 to USD 3. I think that this kind of a price change is also acceptable and friendly for the potential supply to our own customer.
Regarding for the prediction of the demand for the coming winter, we believe that the demand will remain to be sanguine. According to our current collected information, we believe that we will not see major uncertainty or headwind that would put further constraint on the demand according to the data from the State Power or the State Grid Power Corporation and other types of the grid operators. We believe that the supply and also the demand of the natural gas in this coming winter will be relatively matched and also the change of the demand volume in the coming winter will not be very significant, and it will be moderate and mild if there are any changes.
Thank you for your question. From the perspective of the management, of course, we cannot give you the definite data in terms of the prediction of the demand in the coming winter, we do not have the crystal ball that maybe some of the variables that will be in play. However, I would like to say that from our past accumulated fundamentals and from our operation trajectory, we believe that we can well power through all those kind of uncertainties regarding to the changes of the upstream supplies of the natural gas and also to power through other types of the uncertainties, if there is a need. For the overall demand outlook for the natural gas consumption, we believe the overall demand will be at least as flat as we had last year. And also for the current gas price from the upstream suppliers, the previous colleague in the management has mentioning the changes of the price hike that is a little bit minor change.
And we are also foreseeing the price range will be around [ 75% to 80% ]. Regarding for the [ repel ] and repurchase mechanism. Of course, we are also considering the other kids of the [ repel ] program and also we are proceeding from our current business operations. For example, we have different types of the R&D within our current development plan. We are also having some of the setup of the new facilities and equipment like the research laboratory to better support our R&D to maintain the sustainability of our business. So that is why we will consider our actual operation before we make any share buyback or [ repel ] program.
The next question is from the investor of BofA.
Three questions. The first question is about the cost pass-through. So in the first quarter, it was [ 59 ]. How about the comparison with the first half of this year. So the first question is about the cost pass-through.
The second is about the ASP change.
The third is about the procurement cost in the fourth quarter -- in the third quarter, you have an apple-to-apple comparison in terms of your procurement costs in terms of the natural gas compared with last year?
Thank you for your question. I'm going to take your questions. For the third quarter, we have also unveiled different tests of the breakdown analysis and also for our disclosure of the information for the first quarter, we have also cover some of the background information that may influence the cost pass-through. But for the actual implementation of the cost pass-through, we need to proceed from the actual situation like in [ Hunan ] province or Hunan province or in different regions in China. We need to be highly variable and highly flexible and also very differentiated in terms of the cost pass-through.
And also, we hope that 80% of our existing projects can be covered by the cost pass-through mechanism, but we need to be very regional specific in terms of the implementation of the pass-through. In the first quarter compared with the first half of this year, the ASP has not been presenting much change according to the regional breakdown of our newly connected customers. So that is why in the ASP scenario in the third quarter, it has been very similar to the ASP in the first half of this year. In terms of the procurement cost of the natural gas, I think there are also not too much change relating to the procurement costs from the upstream suppliers in comparison between the first half of this year and also the third quarter.
So that is the answer from the management. So a follow-up question. Compared with 2023 on the comparison -- in the comparison in Q4 of '24 and Q3 of '23 and what is the comparison result?
And there is a reduction of the ASP in the third quarter of this year, it was -- if it is compared with the third quarter of the previous year in 2023. So there is a minor reduction of the ASP by $0.10. The reduction is $0.10 for this year.
So what is the major reduction of the ASP reduction compared with last year? Because the margin -- the dollar margin has been increased by 0.04%, is it the main trigger for the different ASP between the last year and also this year. For the change of the dollar margin, the increase of the dollar margin by $0.04, it is also influenced by other types of operation strategies like the better optimization of the procurement cost.
The next question is from Albert in Morgan Stanley.
Thank you, management. This is Albert. One question. Just now Mr. Wang Zizheng has mentioned some of the basic scenario. So I would like to ask that in terms of integrated energy business of [ ENN ] Energy business, what is the CapEx for the IE? I understand that IE only occupy a relatively small proportion out of your total revenue and also, I understand that you have set very clear guidance for the IE business segment for the whole year. If the revenue generation for the IE is lower than your guidance, will this impact your CapEx setting for IE segment next year? And what is the overall CapEx for IE this year in 2024?
The next question by the end of Q3 and what is the LNG trading net profit for you?
In terms of related to the business of IE in the interim results announcement, we have also maintained our development in terms of the top line and also the development outlook for the IE projects. We are also expecting bigger and more momentum for the IE business in the foreseeable future. We have also widened the coverage of the customer portfolio, especially the 2B business or the IE business.
In terms of CapEx, we have been making every preparation we make and also increase our revenues in terms of the support for our CapEx and spending, especially for some niche segments like IE. We have also increased the leverage in some of the financial channels.
In terms of our financial or financing arrangement, we tried to take the holistic picture in mind and also the actual need of different segments of our business. We are also considering other subsegments like the ES, energy storage, and also the PV sectors, et cetera.
So PV and also ES are also the niche segments for us under IE. That is why for the development of the segment of the integrated energy, we are arranging ample CapEx for IE, so you can feel assured towards that.
Regarding for the second question of our perhaps, I would like to make some points relating to the CapEx of IE. When we are promulgating the CapEx, we would like to be closer to the highest level or the maximized level of our presumption or assumption. In terms of the permutation of the CapEx, of course, we are prudent and discrete, but we would like to precede each possible sectors while we are promulgating the CapEx for IE. At the beginning of this year, we had a very good prospect, and we believe that the development outlook for [ then ] will be very sanguine for IE. And in the coming quarters, the development of IE have been presenting a lot of new momentum, and it is true and it is for real, and its development is becoming more diversified.
However, under the suggestment of IE, it is presenting different types of the ASP and also different gross margins among different subsegments of IE. That is why we are also making flexible arrangements relating to the breakdown spending of the CapEx of the IE and subsegments under IE.
In terms of the LNG business or the overseas trading of the overseas business, we have been making different kinds of the hedging and different kinds of the arbitrage relating to the LNG trading with around [ RMB 280 million ] revenue before tax. So that is the latest development relating to the LNG trading. Of course, at the beginning of this year, we set a kind of guidance of [ RMB 300 million ] for this kind of revenue of ING trading. So our actual performance has been in line with our prediction or guidance that was set at the beginning of this year.
[Operator Instructions] The next question is the investor from JPMorgan.
I would like to be brief. I have 3 questions. The first question regarding for the IE segment, for IE according to our knowledge, by the end of last year -- by Q4 of last year, the sales volume of the IE has been very good, around 100 million kilowatt hours by the end of last year, the sales volume of IE. So for 2024, if you are going to meet the annual guidance, some of the sales volume of IE, what kind of growth rate you need to achieve for the fourth quarter of the sales volume of i.e., more than 10%? Higher than 10%? So for, IE in the third and the fourth quarter, what is your expectation? And what is your take of the ASP and gross margin of IE?
The first question is relating to dollar margin. Just now you mentioned that -- according to this kind of calculation in Q3, the dollar margin was around $0.55 in second quarter, $0.61. In the comparison between Q2 and Q3 in terms of dollar margin, what was the trigger behind this kind of difference of the dollar margin in the 2 quarters? And what have been the influential factors for a lower dollar margin in Q3 than Q2? So in Q4, just now you mentioned that for the LNG price and there is no very significant reduction of the LNG price. So what is the rationale behind?
The next question is related to the VAB, value-added business. I understand that it is not convenient for you to provide very detailed numbers. But what is your take for the future growth of the value-added business.
I would like to take your questions. Just now you mentioned the growth of the integrated energy business, there are different types of influential factors. First, it is due to seasonality for IE business in Q1 and Q4, it is the peak season due to seasonality, and there has been different kinds of the demand generated from the heat supply. So that is why there has been better development in Q1 and Q4 for IE. For the ongoing installed capacity, for the IE, it has reached more than 30 megawatts. So this is already a very high number in terms of the installation capacity for the existing projects of the IE. We are also having other kinds of the [ mitral ] IE projects, which will cover different 2B business and also they are expecting to cover other types of the -- they will use or the residential or community use in the foreseeable future apart from the expansion in the 2B customer. So that is why we believe that although there are some of the unevenly distributed growth rate among the 4 quarters, but the overall growth rate for the IE for the whole year can still be in light of our annual guidance.
In terms of the growth of the business. We are also making very good ASP or pricing mechanism. And for the ASP or gross margin of the IE business, they have been similar to the previous year.
I would like to take your next question. I would like to add a few comments to your previous question. In Q2 and also in Q3, there have been some of the changes relating to the customer profiling. As you can render your observation in the first half of this year, there have been different types of influence to some of the C&I customers, especially 2B customer due to the impact from the macroeconomic situation. We are also having differentiated or changing demand from those kind of C&I or 2B customer. And also just now it was mentioned by the other management, there has been differentiating seasonality impact in Q2 and Q3 and in comparison with Q1 and Q4. So these are the conventional and financial factors that have been in place for a long time.
And regarding for your question of dollar margin, there has been changes of the customer profiling and also the different types of the customer portfolio. So this is one of the major reasons which generate different dollar margin for the second quarter and the third quarter, but we still maintain an average dollar margin at $0.54 in the first 3 quarters of this year. We are also making very differentiated arrangements for different types of the C&I customer. Say we have some customers from the engineering and construction sector because for the engineering and construction sector customer, of course, they can be covered in the installed daily capacity for C&I customers.
However, there will be a kind of reinvesting or recalibration when their construction work has been finished, so that may be some of the variance or some of the differentiation in the earlier calculation and also in the later calculation when the construction work has been finished. So this will also exert some of the impact to the actual generation of the revenue and also the profit at the same time.
I want to mention other kinds of the influential factors like the local government's policy. We need to echo the local government's policy in terms of the providing of the energy like the retail gas. So that is why in order to go with those kind of policy change, we need to change our playbook from time to time. So that has also caused some of the difference in the dollar margin from the second quarter in the third quarter.
And also in terms of the natural gas, there has been changes in the pricing of price setting among different regions. And this kind of magnitude of the price change is also highly variable from one city to the other. So it is very regional specific. That is why we need to regard to the specific region and also need to price in the local government's policy in terms of the regulation relating to the retail gas ASP. We are also pricing in those kind of price spread among different types of the vendors in the same city like those kind of those kind of gate price in different types of the offtake point and also different kinds of the gas refueling station.
I want to add some comments relating to the value-added business or smart home business in the third quarter regarding for the revenue and also the gross margin for the value-added business. Those kind of key indicators has been well within our expectations, and we think our comfort [ zone ]. In terms of the smart home business or value-added business, we are diversifying our product offering, including the providing of some of the intelligent cooking utensils or cooking equipment to help them to increase the overall intelligentization or digitalization in their own kitchen or in their own household. That is why we foresee greater potential for the development of the value-added business.
[Operator Instructions] Next question, Dennis of Daiwa.
Mr. Wang. I want to ask you 4 questions. The first question regarding for IE, integrated energy. In the first 3 quarters, the sales volume has been growing at a pace of 21.4%, but the annual guidance for the growth of the sales volume is ranging from 20% to 30%. So what is your outlook for the future growth rate of the IE segment?
The second question is regarding for the fact that in terms of your gross profit of your traditional gas sales, do you think that the annual growth rate can be around 10% in terms of the gross profit. What will be the dollar margin in the third quarter in comparison with the first half of this year, in terms of the value-added business?
My next question, what is the -- could you share with us more data in terms of the growth of the value-added business?
The next question is about the LNG trading. In the first quarter of 2024, what is the comparison between its performance in the third quarter and also the performance of the LNG trading in the first half of the year?
I would like to take your first question. Just now you mentioned in terms of the growth of 21.4% in the first 3 quarters of the IE business. You mentioned the growth rate has been around 25% to 26% in the first half of this year for the IE business. So the first international factor is the seasonality because Q1 is traditionally peak season for those kinds of energy supply. We have already made this kind of analysis and explanation previously and in the year-on-year comparison in Q3 of this year.
Last year, in the IE business, we had a lower portfolio of product segments with lower ASP. And this year, we have an increased number of the proportion of the product segment under IE, which are presenting higher ASP. So that is why in the third quarter of this year, our IE business is presenting better momentum, and it is becoming more diversified and more dynamic. And what is more, for IE business, it is [ establishing ] better relationship with an increasing number of the power-related operator or the power plant. And for the annual guidance in the third quarter, we believe that for the IE business, although the growth rate in terms of the sales volume is a little bit different from the growth rate in the first half of this year, we are still very confident for the annual growth of the IE segment. And also for the whole year, we are very confident we can achieve the growth of the gross margin and also the overall revenue in the new segments that we are operating, although there were some of the headwinds in the third quarter.
Thank you for your question. Regarding for the gross margin of retail sales, for the retail gas sales, the annual guidance of 10% of increase is not altered. It's not changed, 10% of growth for the gross margin of the retail gas business or the traditional gas sales. So this guidance is remaining unchanged.
Your next question is relating to the value-added business. For the VAB as we have been mentioning, we -- for some of the VAB and for some of the niche segments or subsegments under the value-added business, they are not consolidated under our financial statement at the time being. But for the growth rate of the value-added business, if we have covered those kind of niche subsegments under the VAB into our balance sheet or into our financial statements, the performance of the value-added business will be well in alignment with our prediction and with our guidance.
In terms of the other kinds of the business, including the LNG trading and other types of the business in the overseas, we still believe that we can be very close to our annual guidance of [ RMB 300 million ] because the latest figure is around [ RMB 280 million ], as I have been mentioning. But last year, the overall -- the overall revenue generated from this part of the segment of the LNG trading was close to [ RMB 1.5 billion. ] So there is a kind of a wide spread between these 2 parts of the business in terms of the year-on-year comparison. But actually, we try to be diversified in this kind of business expansion and also the business continuation, we do not think that this will have a lot of impact on our overall operations. Although there has been change in the overall revenue generated from the LNG trading, we regard the retail gas sales to be our mainstream business, and this is presenting further sustainability in the foreseeable future.
A follow-up question from Pierre. My question is as follows. You mentioned in this year, the CapEx is lower than $8 billion that you have mentioned earlier. So for those kind of CapEx, actual spending, it is lower than your goal of the CapEx that is set at the beginning of this year. So for this kind of outstanding balance, where would you like to use this kind of untapped financial resources for the repurchase of the share or the investment in other areas?
For the possible options or the viable options you mentioned, we need to submit proposal to the Board of Directors and wait for their approval after the deliberation. So that is why we are open to all the viable auctions. Regarding for the repurchase program or the increase of the dividend payout ratio, of course, we will be in mid of the approval from the Board of Directors.
Do we have more questions, operator?
No more questions from the main line. Thank you. Any final remarks that the management would like to make?
First of all, thank you, dear investors. Thank you for taking time out of your busy schedule, and thank you for your long-term support and endorsement for our company. For ENN Energy, at the beginning of this year, we have been sharing with you in a very candid manner of what we are expecting and what are the headwinds and tailwinds around us. We are upgrading our business and becoming more diversified and also on the trajectory of the [ uplift ] growth. Of course, for the newly developed segments like the integrated energy and also the expansion of new type of a customer like 2B and 2C, we are doing what we can, and we have achieved very good results and lead development. We are humbly -- we are very humble to take any suggestion and advise from the investors. Thank you for your support.
Thank you, management. Thank you, Mr. Zhang. I would like to wrap up today's conference call. Thank you very much for your time.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]