BOCOM International·2025-06-20 10:02Investment Rating - The investment rating for the company is Neutral with a target price of HKD 6.70, indicating a potential downside of 11.4% from the current price of HKD 7.56 [4][17]. Core Insights - The company is expected to experience a decline in profit for the fiscal year 2025 due to the impact of a warm winter, with a focus on the certainty of profit improvement in the following year [2][7]. - The forecast for fiscal year 2025 has been adjusted downwards by approximately 2% to reflect the impact of the warm winter on gas sales volume, with an expected core profit decrease of 6.4% to HKD 3.712 billion [7][8]. - The company anticipates a slight increase in retail gas volume of about 1% year-on-year, which is below the company's guidance of 2% [7][8]. Financial Overview - Revenue is projected to decline from HKD 91,988 million in 2023 to HKD 75,183 million in 2025, reflecting a year-on-year decrease of 7.6% [3][18]. - Net profit is expected to decrease from HKD 4,293 million in 2023 to HKD 3,712 million in 2025, with a year-on-year decline of 6.4% [3][18]. - The earnings per share (EPS) is forecasted to drop from HKD 0.76 in 2023 to HKD 0.68 in 2025, indicating a decrease of 6.4% [3][18]. Operational Insights - The company expects retail gas volume to grow by 2% year-on-year in fiscal year 2026, with a projected gas margin increase to RMB 0.54 per cubic meter [7][10]. - The number of new residential connections is anticipated to decline by approximately 21% to 1.25 million households in fiscal year 2025 [7][9]. - The company maintains a dividend of HKD 0.35 for the final period, with an annual payout of HKD 0.50 [7][8]. Valuation Metrics - The price-to-earnings (P/E) ratio is projected to be 11.1 times for fiscal year 2025, with an expected price-to-book (P/B) ratio of 0.75 [3][18]. - The company has a dividend yield of 6.6%, which is considered defensive [7][8]. - The target price has been adjusted to HKD 6.70 from the previous HKD 5.92, reflecting a more favorable valuation compared to other gas companies [7][8].