BOCOM International·2025-06-30 06:19Investment Rating - The investment rating for the company is Neutral [4][19]. Core Views - The report indicates that the company's earnings for the fiscal year 2025 will be impacted by one-time items, while cash flow certainty for fiscal year 2026 remains to be improved [2][8]. - The company is expected to maintain a high dividend yield of 6.8%, which is the highest among gas distributors covered [8][19]. - The report suggests that the valuation is reasonable at approximately 10 times the fiscal year 2026 earnings, with a target price adjustment to HKD 6.80, reflecting a potential downside of 7.5% from the current price [8][19]. Financial Overview - Revenue projections for the company are as follows: - FY2024: HKD 81,410 million - FY2025: HKD 79,258 million (down 2.6% YoY) - FY2026E: HKD 80,449 million (up 1.5% YoY) [3][22]. - Net profit estimates are: - FY2024: HKD 3,185 million - FY2025: HKD 3,252 million (up 2.1% YoY) - FY2026E: HKD 3,707 million (up 14% YoY) [3][22]. - The company’s earnings per share (EPS) are projected to be: - FY2024: HKD 0.73 - FY2025: HKD 0.63 (down 14.1% YoY) - FY2026E: HKD 0.68 (up 8.5% YoY) [3][22]. - The company’s free cash flow reached a record high of HKD 46.6 billion [8]. Operational Insights - Retail gas sales volume is expected to grow by 2% in FY2026, with a slight increase in gas margin to RMB 0.55 per cubic meter [10][11]. - The company anticipates adding 120,000 to 140,000 new residential connections in FY2025 [11]. - The management's guidance for FY2025 includes a gas margin of RMB 0.53 per cubic meter and a growth rate of over 2% for gas sales volume [11]. Market Performance - The stock has shown a year-to-date change of 8.57% [6]. - The 52-week high and low for the stock are HKD 8.26 and HKD 5.87, respectively [6].