Zhi Tong Cai Jing·2026-01-16 09:49Core Viewpoint - Bank of America Securities initiates coverage of Hong Kong and China Gas (00003) with an "underperform" rating and a target price of HKD 6.5, citing improved profit outlook due to lower gas costs but insufficient free cash flow to cover dividends [1] Group 1: Profit Outlook - The group's profit outlook has improved this year due to a decrease in gas costs [1] - However, the free cash flow is projected to be insufficient to cover dividend payments, limiting the potential for dividend increases in the coming years [1] Group 2: Dividend Forecast - The company is expected to maintain stable dividends in the future, with a maximum dividend payout of HKD 6.5 billion, which is not fully supported by the projected free cash flow of HKD 35 billion to HKD 47 billion [1] - The current dividend yield of approximately 4.9% is comparable to other Hong Kong utility peers but is considered unattractive by Bank of America Securities [1] Group 3: Market Environment - The company faces a challenging market environment, and its restructuring efforts are unlikely to provide significant short-term benefits [1] - Net profit forecasts for 2025 to 2027 are approximately 4% lower than market expectations, further constraining the company's ability to outperform the market [1]