Ge Long Hui·2025-12-03 04:20Core Viewpoint - China Gas reported a decline in revenue and net profit for 1H FY2025/26, primarily due to reduced new user connections and slower industrial gas demand, although free cash flow increased significantly [1][5]. Group 1: Financial Performance - The company achieved a revenue of HKD 34.481 billion, a year-on-year decrease of 1.8% [1]. - Net profit attributable to shareholders was HKD 1.334 billion, down 24.2% year-on-year, falling short of expectations [1]. - Free cash flow reached HKD 2.6 billion, representing a year-on-year increase of 17.2% [1][4]. - The company proposed an interim dividend of HKD 0.15 per share, unchanged from the previous year [1]. Group 2: Gas Sales and Margins - Natural gas sales volume was 17.41 billion m³, a year-on-year increase of 1.7%, with town gas sales volume at 9.19 billion m³, down 1.5% [2]. - The retail gas gross margin was HKD 0.58 per m³, a slight decrease of HKD 0.01 per m³, mainly due to a decline in high-margin industrial gas [2]. - The company maintains a gross margin target of HKD 0.55 per m³ for the full fiscal year, indicating potential for a HKD 0.01 per m³ increase compared to FY2024/25 [2]. Group 3: User Connections and Impact - The company added 676,300 new residential users, a decline of 25.2% year-on-year, with new building connections accounting for 67.9% of the total [3]. - The pre-tax profit from connection and engineering services constituted only 16.0% of total business segment profits, indicating a decreasing contribution to overall profitability [3]. - The forecast for new user connections in FY2025/26 is expected to be between 1 million and 1.2 million, suggesting a continued decline in the impact of connection services on overall performance [3]. Group 4: Value-Added and Comprehensive Energy Business - Revenue from value-added services reached HKD 2.02 billion, a year-on-year increase of 0.3%, with operating profit at HKD 1.02 billion, up 1.3% [4]. - The company saw significant growth in commercial user energy storage, reaching 617.7 MWh, a year-on-year increase of 693.5% [4]. - Electricity sales volume increased by 25.5% year-on-year, with green certificate trading volume rising by 709% [4]. Group 5: Financing and Cost Management - The company achieved a record high free cash flow of HKD 2.6 billion due to reduced capital expenditures [4]. - Financing costs decreased to 3.39%, down 0.45 percentage points from FY2024/25, reflecting improved debt structure management [4]. Group 6: Investment Rating - The company maintains a "Buy" rating despite a slowdown in gas sales growth and ongoing pressure on connection services, with revised net profit forecasts for FY2025/26 to FY2027/28 [5]. - The current stock price corresponds to a PE ratio of 14, 12, and 11 for FY2025/26 to FY2027/28, respectively, with a stable dividend policy and a competitive dividend yield in the industry [5].