HTSC·2026-03-22 10:45Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 7.90 [6]. Core Insights - The company reported a revenue of HKD 54.3 billion for 2025, a decrease of 2.1% year-on-year, while core profit increased by 4% to HKD 6.0 billion, aligning with expectations [1]. - The company plans to maintain a stable dividend policy with a payout of HKD 0.35, resulting in a dividend yield of approximately 4.8% [1]. - The report highlights the company's strong energy security advantages and the profitability turning point for green fuel business, supporting the investment thesis [1]. Summary by Sections Hong Kong Gas - In 2025, Hong Kong gas sales remained stable at 27,181 TJ, with residential gas consumption increasing due to lower average temperatures, offsetting slight declines in commercial and industrial gas usage [2]. - The company added 20,000 new customers, benefiting from the Northern Metropolis Development Plan, which aims to provide over 500,000 residential units over 20 years, potentially increasing gas demand [2]. - The EBITDA margin for Hong Kong is expected to remain around 50% in 2026 [2]. Mainland City Gas - In 2025, mainland city gas sales volume was 36.35 billion cubic meters, remaining flat year-on-year, with slight growth in residential gas due to old community renovations and new user connections [3]. - The gas price difference improved to RMB 0.54 per cubic meter, driven entirely by residential gas price increases, with a price adjustment coverage rate of 90% [3]. - The report anticipates a further increase in the city gas price difference to RMB 0.56 per cubic meter in 2026 [3]. Green Fuel - The sustainable aviation fuel (SAF) production capacity is expected to reach 770,000 tons by the end of 2025, with significant price increases observed in SAF and HVO since the beginning of the year [4]. - The green methanol strategy aligns with policy cycles, with the Foshan plant expected to start production by the end of 2027, matching the implementation of IMO shipping emission reduction targets [4]. - The report projects a sales target of 40,000 tons for green methanol in 2026, catering to shipping and green chemical demands [4]. Free Cash Flow and Valuation - The report suggests that the company's free cash flow is likely to exceed expectations, with a target price adjustment to HKD 7.90, reflecting a 19% premium over the historical average [5][29]. - The company’s estimated net profit for 2026-2028 is projected at HKD 6.09 billion, HKD 6.45 billion, and HKD 6.77 billion, respectively [5]. - The report adjusts the valuation to 2.5x PB for 2026, maintaining the previous year's multiple, indicating confidence in the company's growth potential [5][29].