Investment Rating - The report assigns a "Buy" rating to the company with a target price of HKD 9.35, indicating a potential upside of 19.0% from the current price of HKD 7.86 [11]. Core Insights - The company is expected to see moderate profit growth in the first half of 2024, driven by resource integration in its gas station operations, leading to an increase in LNG segment profits. The net profit for the first half of 2024 is projected to grow by 2.6% to RMB 3.3 billion, aligning with expectations [2][4]. - The company has successfully integrated gas station resources, which has positively impacted its LNG processing segment, turning a profit of RMB 0.35 billion in the first half of 2024 compared to a loss of RMB 0.55 billion in the same period last year [2]. - The company has declared an interim dividend of RMB 0.164 per share, with a payout ratio of 43%, which is expected to increase to 45% by 2025 [2][4]. Financial Overview - Revenue for 2024 is estimated at RMB 188.3 billion, reflecting a year-on-year growth of 6.2% [14]. - The net profit for 2024 is projected to be RMB 6.8 billion, with a compound annual growth rate (CAGR) of 10% expected from 2023 to 2026 [2][14]. - The company’s earnings per share (EPS) for 2024 is forecasted at RMB 0.79, representing an 11.2% increase compared to the previous year [14]. - The company’s dividend yield is projected to be 4.7% for 2024 and 5.4% for 2025, making it an attractive investment option [2][14]. Segment Performance - The natural gas sales segment is expected to see a revenue increase of 9.6% year-on-year in the first half of 2024, despite a decrease in gas station sales volume [4]. - The LNG processing and storage segment is projected to grow by 18.0% year-on-year in the first half of 2024, benefiting from improved operational efficiency [4]. - The LPG sales segment is anticipated to improve significantly, with a projected year-on-year profit increase of 57% for 2024 [2][8]. Market Position - The company has a market capitalization of approximately HKD 68.06 billion and has shown a year-to-date price change of 11.65% [1][11]. - The stock has a 52-week high of HKD 9.06 and a low of HKD 5.53, indicating a strong recovery potential [1].

Investment Rating - The investment rating for the company is "Buy" with a target price set above the current price of 7.86 HKD, maintaining the rating for the next six months [1]. Core Insights - The company reported a revenue of 929.22 billion RMB for the first half of 2024, representing a year-on-year increase of 6.72%, with a net profit attributable to shareholders of 3.305 billion RMB, up 2.58% year-on-year [2]. - The growth in retail gas volume exceeded expectations, with a total gas sales volume of 26.438 billion cubic meters, a year-on-year increase of 10.5%, and a significant increase in the number of commercial and industrial users [3]. - The LNG processing and storage segment showed remarkable growth, with sales revenue increasing by 18% and a pre-tax profit increase of 22.9% [4]. - LPG sales exceeded half of the annual target, achieving a sales volume of 2.9258 million tons, with a pre-tax profit increase of 32.62% [5]. - The company announced a mid-term dividend of 0.164 RMB per share, with a payout ratio of 43% [6]. - Profit forecasts for the years 2024, 2025, and 2026 are maintained at 6.504 billion, 7.014 billion, and 7.599 billion RMB respectively, with corresponding EPS of 0.75, 0.81, and 0.88 RMB [7]. Summary by Sections Basic Data - Total shares outstanding: 8,658.80 million shares - Total market capitalization: 68,058.18 million HKD - Net asset value per share: 8.08 HKD - Debt-to-asset ratio: 39.09% - Highest/Lowest price in one year: 9.23/5.45 HKD [1]. Performance Metrics - The company achieved a total gas sales volume of 26.438 billion cubic meters, with retail gas volume at 16.302 billion cubic meters, reflecting a year-on-year increase of 10.3% [3]. - The average gas selling price was 2.87 RMB per cubic meter, while the average purchase price was 2.42 RMB per cubic meter [3]. Capital Expenditure - Capital expenditure for the first half of 2024 was 2.817 billion RMB, primarily for natural gas sales [6].

Investment Rating - The report maintains a "Buy" rating for the company, indicating a strong performance relative to the market [4]. Core Insights - The company reported a revenue of 92.922 billion RMB for the first half of 2024, reflecting a year-on-year growth of 6.72%. The net profit attributable to shareholders was 3.305 billion RMB, an increase of 2.58%, aligning with expectations [4]. - The company has announced its first interim dividend of 0.1641 RMB per share [4]. - Natural gas sales volume reached 26.438 billion cubic meters in the first half of 2024, a year-on-year increase of 10.55%, with retail gas volume growing by 10.25% [4]. - The company has expanded its user base, adding 448,900 new users in the first half of 2024, bringing the total to 16.0529 million users [4]. - The average load rate of LNG receiving stations improved to 85.4%, with a significant increase in LNG loading volume by 53.5% [4]. - The company achieved a tax-pre profit of 3.5 million RMB from its LNG processing and storage business, marking its first profit in history [4]. Financial Summary - Revenue for 2022 was 171.944 billion RMB, with projections of 177.354 billion RMB for 2023, and expected growth to 195.839 billion RMB in 2024 [5]. - The net profit attributable to shareholders is projected to grow from 5.682 billion RMB in 2023 to 6.986 billion RMB in 2024 [5]. - The company plans to increase its dividend payout ratio to 45% by 2025, enhancing its investment appeal [4].

Financial Performance - Revenue for the six months ended June 30, 2024, was RMB 92,922 million, up 6.72% from RMB 87,072 million in 2023[2] - Profit attributable to shareholders for the period was RMB 3,305 million, representing a 2.58% increase from RMB 3,222 million in 2023[3] - Basic earnings per share increased to RMB 38.17, up 2.58% from RMB 37.21 in the previous year[3] - Total revenue for the six months ended June 30, 2024, was RMB 95,342 million, compared to RMB 89,510 million for the same period in 2023, representing an increase of approximately 6.5%[12] - The company reported a total profit before tax of RMB 7,249 million for the six months ended June 30, 2024, compared to RMB 6,791 million for the same period in 2023, indicating a year-on-year growth of approximately 6.7%[11] - Total revenue reached RMB 92.922 billion, up RMB 5.850 billion or 6.72% year-on-year; net profit attributable to shareholders was RMB 3.305 billion, an increase of RMB 0.083 billion or 2.58% year-on-year[24] Sales and Volume - Total natural gas sales volume reached 26,438 million cubic meters, an increase of 10.55% compared to 2023[1] - The company achieved natural gas sales of 26.438 billion cubic meters in the first half of 2024, an increase of 2.522 billion cubic meters or 10.55% year-on-year[24] - Revenue from natural gas sales was RMB 76.660 billion, reflecting a year-on-year growth of 9.74%; the pre-tax profit was RMB 5.005 billion, up 2.41% year-on-year[28] - LPG sales volume reached 2.9258 million tons, maintaining stability compared to the same period last year; revenue was RMB 12.932 billion, a decrease of 6.66% year-on-year; profit before tax was RMB 561 million, an increase of 32.62%[29] - LNG processing and storage business achieved a revenue of RMB 5.662 billion, a year-on-year increase of 9.14%; profit before tax was RMB 1.648 billion, up 22.89%[30] Assets and Liabilities - Total assets as of June 30, 2024, were RMB 143,519 million, compared to RMB 142,327 million at the end of 2023[5] - Total liabilities as of June 30, 2024, were RMB 55,630 million, compared to RMB 57,736 million at the end of 2023[5] - Total equity increased to RMB 86,697 million from RMB 84,372 million in December 2023[4] - The capital debt ratio as of June 30, 2024, was 22.24%, a decrease of 0.47 percentage points from 22.71% as of December 31, 2023[39] - Total borrowings amounted to RMB 24,111 million, with RMB 8,557 million due within one year as of June 30, 2024[40] Employee and Compensation - Employee compensation costs increased to RMB 3,169 million, up from RMB 2,628 million in 2023[2] - The company employed 24,371 employees globally as of June 30, 2024, a decrease from 28,139 employees in the same period last year[43] Dividends and Shareholder Returns - The company declared an interim dividend of RMB 16.41 per share, compared to no dividend in the previous year[1] - The company declared an interim dividend of RMB 0.1641 per share, totaling approximately RMB 1,421 million, based on 8,659 million shares issued[20] Operational Efficiency - The company’s operating cash flow reached RMB 5.352 billion, indicating strong operational efficiency[25] - The average load rate of two LNG receiving stations increased by 3.6 percentage points year-on-year, with a total gasification and loading volume of 7.770 billion cubic meters, up 5.92% year-on-year[30] Strategic Initiatives - The company is optimistic about achieving annual performance guidance and future development, focusing on four key areas: market expansion, strategic upgrades, operational management, and technological empowerment[33] - The company plans to accelerate the development of new energy projects, aiming for breakthroughs in six gas-electricity projects and advancing distributed natural gas projects in Chongqing[33] - The company has initiated 13 natural gas power generation projects with a total installed capacity of 8.81 million kilowatts[26] Governance and Compliance - The board of directors has confirmed compliance with the standard code of conduct for securities trading throughout the reporting period[51] - The company is in the process of selecting a suitable auditor as of May 29, 2024, and will make further announcements in accordance with listing rules[51] - The detailed interim performance report will be published by September 20, 2024, on the Hong Kong Stock Exchange and the company's website[52] Other Financial Metrics - Interest income rose to RMB 499 million, compared to RMB 394 million in 2023[2] - Interest expenses for the period were approximately RMB 411 million, a decrease of 5.73% from RMB 436 million in the same period last year[38] - Other net income for the period was approximately RMB 746 million, significantly up from RMB 239 million in the same period last year, mainly due to increased rental income from LNG refueling business integration[36] - The share of profits from associates was approximately RMB 335 million, an increase of 6.01% from RMB 316 million in the same period last year, primarily due to increased proven oil and gas reserves at CNPC-Aktobemunaigas Joint Stock Company[38]

Summary of Kunlun Energy Conference Call Company Overview - **Company**: Kunlun Energy - **Date of Call**: July 11, 2024 - **Industry**: Natural Gas and Energy Key Points and Arguments Industry and Market Dynamics - The natural gas sector is expected to transition from profit volatility to stability, driven by policy changes similar to those seen in the thermal power sector [2][3] - Long-term growth is anticipated due to increasing penetration rates in the industrial sector, with a focus on commercial users, which currently account for 88% of Kunlun's customer base [2][3] Financial Performance and Cash Flow - Kunlun Energy reported a free cash flow of 10 billion in the previous year, with expectations for stable growth and increased capacity from future projects [3][4] - The company's enterprise value, based on a discounted cash flow model, is estimated at 140 billion, indicating significant upside potential in equity value [3][4] - The company’s cash flow generation capabilities are considered undervalued compared to industry peers, with a potential return on equity (ROE) increase from 9% to over 13% [10][11] Business Structure and Profitability - Kunlun's business model benefits from large-scale industrial gas customers, which enhances cash flow efficiency and reduces maintenance costs [7][8] - The company has a significant amount of idle assets, approximately 20 billion, which could be utilized to improve asset returns [12][16] - The compound annual growth rate (CAGR) for the company's retail gas sales over the past five years is 16%, significantly higher than the national average of 7.1% [12][30] Growth Projections - Projected net profits for 2024, 2025, and 2026 are expected to reach 6.1 billion, 6.6 billion, and 7.1 billion respectively, with a CAGR of approximately 7.5% [17][35] - The dividend payout ratio is expected to increase from 42.2% in 2023 to 45% by 2025, indicating strong dividend growth potential [27][37] Competitive Positioning - Kunlun Energy's pricing structure remains stable, with a price difference maintained around 0.5 yuan per cubic meter over the past five years, benefiting from its relationship with PetroChina [15][31] - The company is positioned as a leading player in the urban gas market, with over 50% of its projects located in regions benefiting from industrial transfer policies [12][14] Future Outlook - The company plans to enhance its LNG processing capacity, with expectations for increased profitability from its LNG plants in the coming years [32][36] - The overall market valuation suggests a potential upside of nearly 40% when compared to similar companies in the U.S. gas sector, which trade at higher price-to-earnings ratios [38] Additional Important Insights - The company has undergone significant restructuring since 2009, focusing on downstream natural gas sales and reducing its upstream oil exploration activities [19][20] - The operational efficiency of Kunlun's LNG receiving stations is notably high, with a utilization rate of 95%, significantly above the national average [32][33] - The company’s strategic asset management and cash flow generation capabilities are expected to drive future growth and shareholder returns [11][27] This summary encapsulates the key insights from the conference call regarding Kunlun Energy's market position, financial performance, growth prospects, and strategic initiatives.

Summary of Conference Call Company/Industry Involved - The conference call pertains to the animal environmental public utility sector, specifically focusing on the gas and agricultural energy industry [1] Core Points and Arguments - The call is structured to provide insights primarily for institutional investors and invited clients, emphasizing that the opinions expressed are personal and do not necessarily reflect the views of the organization [1] Other Important but Possibly Overlooked Content - The meeting begins with a disclaimer highlighting the nature of the information shared, indicating a focus on transparency and the importance of understanding the context of the opinions presented [1]

Investment Rating - Maintained "Buy" rating with a target price of HKD 10.71 [1][13] Core Views - Retail gas volume growth is expected to outperform peers in 1H24, driven by industrial gas growth [13][14] - Retail gas price spread may face slight pressure in 1H24 due to structural factors and LNG competition [13][15] - LNG terminal utilization rate is expected to rise year-on-year in 1H24, with long-term growth potential in the southeastern coastal market [13][16] - Core profit for 2024-26 is forecasted at RMB 6.46/6.73/7.11 billion, with a dividend payout ratio expected to increase to 42% in 2024 [13] Financial Performance - Revenue for 2022-2026E is projected at RMB 171,944/177,354/180,491/185,325/194,539 million, with year-on-year growth rates of 24.11%/3.15%/1.77%/2.68%/4.97% [7][8] - Net profit attributable to the parent company for 2022-2026E is forecasted at RMB 5,228/5,682/6,457/6,726/7,105 million, with year-on-year growth rates of 1.69%/8.68%/13.65%/4.15%/5.65% [9] - EPS for 2022-2026E is projected at RMB 0.73/0.71/0.75/0.78/0.82 [10] - ROE for 2022-2026E is expected to be 9.00%/9.21%/9.87%/9.68%/9.67% [10] Valuation Metrics - PE ratio for 2022-2026E is estimated at 11.40x/11.66x/11.09x/10.65x/10.08x [11] - PB ratio for 2022-2026E is projected at 1.20x/1.13x/1.06x/1.00x/0.95x [11] - EV/EBITDA for 2022-2026E is forecasted at 6.30x/5.46x/4.93x/4.69x/4.40x [12] Market Position and Growth Drivers - Retail gas volume growth in 1H23/2023 was +9.5%/+9.2%, outperforming the national average of +5.6%/+7.6%, with industrial gas volume growing +11.1%/+15.5% [14] - LNG terminal utilization rate in 1H23/2023 was 81.8%/90.6%, with 1H24 expected to see a year-on-year increase [16] - The Fujian LNG terminal, which started construction in late 2023, is expected to enhance the company's market position in the southeastern coastal region [16]

Summary of Kunlun Energy Conference Call Industry Overview - The gas industry is gaining attention due to its growth potential and investment opportunities, particularly with the ongoing marketization and price reforms [2][3] - The expected increase in capital expenditure and improved profitability are seen as dual benefits supporting long-term stock price growth [2][3] - Current operational efficiency in the gas industry needs improvement, but price reforms are crucial for ensuring returns on capital expenditure [2][3] Key Points on Kunlun Energy - Kunlun Energy benefits from stable gas supply from its major shareholder, China National Petroleum Corporation (CNPC), which holds a 54% stake [5][13] - The company has a significant market share in the Northwest and Northeast regions, accounting for over 50% of its total users, which helps it withstand market price fluctuations [5][13] - Industrial users are a key driver for Kunlun Energy's growth, with a compound annual growth rate (CAGR) of 26% over the past five years, surpassing the industry average [14][18] - The company has a strong financial position, with stable cash flow around 15 billion yuan and plans to increase dividend payouts [9][15] Financial Performance and Projections - Kunlun Energy's revenue is projected to grow from 190.4 billion yuan in 2024 to 210.6 billion yuan in 2026, with net profits expected to reach 13.3 billion yuan and 14.7 billion yuan respectively [21] - The natural gas sales business constitutes approximately 66% of total profits, with a CAGR of 16% over the past five years [18] - The company aims to increase its dividend payout ratio to 45% by 2025, with an annual dividend growth rate of around 10% [15][17] Strategic Initiatives - The company has undergone a strategic transformation since 2009, shifting focus from upstream oil and gas exploration to downstream operations, including LNG processing and storage [8] - Kunlun Energy's LPG sales account for about 3% of total profits, while LNG processing and storage contribute 30% [10][20] - The company plans to enhance its asset turnover and optimize its capital structure to improve return on equity (ROE), which is currently around 9% [8][14] Market Position and Valuation - Kunlun Energy is perceived to be undervalued compared to peers, with significant upside potential in its price-to-book (PB) ratio [13][14] - The company’s competitive advantages include stable gas supply from its major shareholder and alignment with national strategic initiatives [5][13] - The operational efficiency of its LNG receiving stations is notably higher than the industry average, contributing to its competitive edge [10][20] Conclusion - Overall, Kunlun Energy is positioned as a strong investment opportunity within the gas industry, with solid growth prospects, stable cash flow, and a commitment to increasing shareholder returns through dividends and strategic growth initiatives [2][5][21]

Investment Rating - The report maintains a "Buy" rating for Kunlun Energy [1] Core Views - Kunlun Energy is positioned as a leading urban gas company, benefiting from its strategic transformation and strong backing from its major shareholder, China National Petroleum Corporation (CNPC) [9][21] - The company is expected to enhance its return on equity (ROE) by improving the efficiency of its liquid assets, potentially increasing ROE by 5.3 percentage points [10][14] - The natural gas sales business is experiencing rapid growth, particularly in the industrial sector, supported by favorable government policies promoting industrial transfer to the northwest and northeast regions of China [22][27] Summary by Sections Strategic Transformation - Kunlun Energy transitioned from oil and gas exploration to focusing on domestic natural gas terminal sales and comprehensive utilization since 2009, becoming a major player in the urban gas market [9][10] - The company has undergone continuous restructuring of its downstream business since 2012, enhancing its focus on urban gas, LNG processing, and LPG sales [9][10] Business Performance - The company reported total revenue of 177,726 million yuan in 2023, with a projected increase to 190,778 million yuan in 2024, reflecting a year-on-year growth of 7.34% [2] - The net profit attributable to shareholders is expected to grow from 5,682 million yuan in 2023 to 6,106 million yuan in 2024, representing an 8.68% increase [2] - The retail gas volume reached 303.12 billion cubic meters in 2023, with a compound annual growth rate (CAGR) of 16.0% from 2018 to 2023, significantly outpacing the national average of 7.1% [22][23] Financial Projections - The report forecasts net profits for 2024, 2025, and 2026 to be 61.06 billion yuan, 65.60 billion yuan, and 70.60 billion yuan, respectively, with corresponding price-to-earnings ratios of 10.5, 9.8, and 9.1 [42][41] - The company aims to achieve a dividend payout ratio of 45% by 2025, enhancing shareholder returns [18][19] Market Position - Kunlun Energy is the largest urban gas sales company in China, with a significant market presence across 31 provinces, benefiting from stable gas supply and pricing [9][10] - The company has a strong strategic alignment with CNPC, ensuring reliable gas sources and stable profit margins [21][27]

Investment Rating - The report initiates coverage on Kunlun Energy with a "Buy" rating [2] Core Views - Kunlun Energy is positioned as a leading city gas company, benefiting from its strategic transformation and strong backing from its parent company, China National Petroleum Corporation (CNPC) [2] - The company's gas sales are primarily focused on industrial transfer regions in Northeast and Northwest China, driving rapid growth in gas volume [2] - Kunlun Energy maintains stable price differentials due to its reliable gas supply from CNPC, ensuring steady profitability [2] - The company's LPG and LNG businesses are also experiencing high-quality development, with LNG processing and storage operations achieving profitability [2] Strategic Transformation and Business Development - Kunlun Energy transitioned from oil and gas exploration to focus on domestic natural gas terminal sales and comprehensive utilization in 2009 [7] - The company has undergone continuous restructuring of CNPC's downstream natural gas business since 2012, and in 2021, it sold some midstream assets to concentrate on downstream operations [7] - Kunlun Energy operates in 31 provinces, autonomous regions, and municipalities across China, making it one of the largest natural gas terminal utilization and LPG sales companies in the country [7] - The company's strategic shift has led to steady revenue growth, with a 10-year CAGR of 17.9% from 2013 to 2023 [8] Financial Performance and Valuation - Kunlun Energy's operating revenue for 2023 was RMB 177.726 billion, with a year-on-year growth of 3.16% [1] - Net profit attributable to the parent company in 2023 was RMB 5.682 billion, a year-on-year increase of 8.68% [1] - The company's EPS (fully diluted) for 2023 was RMB 0.66 per share, with a P/E ratio of 11.45 [1] - Kunlun Energy's market capitalization as of the valuation date (May 30, 2024) was HKD 71.5217 billion [1] Gas Sales Business - Kunlun Energy's gas sales are concentrated in industrial transfer regions, with industrial gas consumption driving overall growth [2] - From 2018 to 2023, the company's retail gas volume grew at a CAGR of 16.0%, significantly higher than the national average of 7.1% [2] - Industrial gas sales accounted for 69.4% of total gas sales in 2023, with commercial and residential gas sales making up 9.7% and 12.2%, respectively [2] - The company's gas price differential has remained stable at around RMB 0.5 per cubic meter from 2018 to 2023 [2] LPG and LNG Business - Kunlun Energy's LPG business is supported by stable gas supply from CNPC, with 90.1% of LPG resources sourced from CNPC in 2023 [2] - The company's LNG processing and storage operations have achieved high load rates, with the Tangshan and Jiangsu LNG receiving stations operating at around 90% capacity [2] - Kunlun Energy's LNG factories achieved a load rate of 45.4% in 2023, turning the business profitable for the first time [2] Profit Forecast and Investment Recommendation - The report forecasts Kunlun Energy's net profit attributable to the parent company to be RMB 6.106 billion, RMB 6.560 billion, and RMB 7.060 billion for 2024, 2025, and 2026, respectively, with year-on-year growth rates of 7.5%, 7.4%, and 7.6% [2] - The company's P/E ratios for 2024, 2025, and 2026 are projected to be 10.7x, 9.9x, and 9.2x, respectively [2] - Kunlun Energy's valuation is considered moderate compared to peers, with its stable gas supply from CNPC providing a competitive advantage [2]