2024-09-03 02:12Investment Rating - The report assigns a "Neutral" rating to China Resources Gas (1193 HK) with a target price of HKD 28.90, indicating a potential upside of 9.9% from the current price of HKD 26.30 [1][11]. Core Insights - The report highlights a surprising growth in retail gas profits for the first half of the year, with core profits rising by 21% to HKD 3.46 billion, exceeding expectations by 8% [1]. - Retail gas volume increased by 5.3% year-on-year, with the gas sales margin improving to RMB 0.54 per cubic meter, compared to the expected RMB 0.50 [1][2]. - The company maintained a strong growth in comprehensive service revenue and operating profit, with year-on-year increases of 20% and 22% respectively, despite a 29% decline in profits from the connection engineering segment [1][2]. Financial Performance Summary - For the first half of 2023, total revenue was HKD 48.37 billion, with a gross profit margin of 18.7% [6]. - The company’s net profit for the first half of 2023 was HKD 3.55 billion, reflecting a year-on-year decrease of 2.5% [6][7]. - The report projects a compound annual growth rate (CAGR) of 9.8% for profits from 2023 to 2026, with net profits expected to reach HKD 7.03 billion by 2026 [2][5]. Earnings Forecast - The earnings forecast for 2024 and 2025 has been significantly raised, with retail gas volume expected to grow by 5.3% and 5.1% respectively, and gas sales margins projected at RMB 0.53 and RMB 0.54 per cubic meter [2][5]. - The anticipated new residential connections for 2024 and 2025 are 2.8 million and 2.4 million respectively, reflecting a decline from previous years [2][5]. Valuation and Dividend Outlook - The report maintains a conservative valuation approach, applying a 10x price-to-earnings ratio for 2025 forecasts, which is a 32% discount to the company's historical average [2]. - The interim dividend for the first half of 2023 was raised by 67% to HKD 0.25 per share, with expectations for a slight increase in the payout ratio for 2024 [1][2].