Core Viewpoint - China Gas reported a decline in revenue and net profit for 1H FY2025/26, primarily due to reduced new user connections and slower industrial gas demand, although free cash flow increased significantly [1][5]. Group 1: Financial Performance - The company achieved a revenue of HKD 34.481 billion, a year-on-year decrease of 1.8% [1]. - Net profit attributable to shareholders was HKD 1.334 billion, down 24.2% year-on-year, falling short of expectations [1]. - Free cash flow reached HKD 2.6 billion, representing a year-on-year increase of 17.2% [1][4]. - The company proposed an interim dividend of HKD 0.15 per share, unchanged from the previous year [1]. Group 2: Gas Sales and Margins - Natural gas sales volume was 17.41 billion m³, a year-on-year increase of 1.7%, with town gas sales volume at 9.19 billion m³, down 1.5% [2]. - The retail gas gross margin was HKD 0.58 per m³, a slight decrease of HKD 0.01 per m³, mainly due to a decline in high-margin industrial gas [2]. - The company maintains a gross margin target of HKD 0.55 per m³ for the full fiscal year, indicating potential for a HKD 0.01 per m³ increase compared to FY2024/25 [2]. Group 3: User Connections and Impact - The company added 676,300 new residential users, a decline of 25.2% year-on-year, with new building connections accounting for 67.9% of the total [3]. - The pre-tax profit from connection and engineering services constituted only 16.0% of total business segment profits, indicating a decreasing contribution to overall profitability [3]. - The forecast for new user connections in FY2025/26 is expected to be between 1 million and 1.2 million, suggesting a continued decline in the impact of connection services on overall performance [3]. Group 4: Value-Added and Comprehensive Energy Business - Revenue from value-added services reached HKD 2.02 billion, a year-on-year increase of 0.3%, with operating profit at HKD 1.02 billion, up 1.3% [4]. - The company saw significant growth in commercial user energy storage, reaching 617.7 MWh, a year-on-year increase of 693.5% [4]. - Electricity sales volume increased by 25.5% year-on-year, with green certificate trading volume rising by 709% [4]. Group 5: Financing and Cost Management - The company achieved a record high free cash flow of HKD 2.6 billion due to reduced capital expenditures [4]. - Financing costs decreased to 3.39%, down 0.45 percentage points from FY2024/25, reflecting improved debt structure management [4]. Group 6: Investment Rating - The company maintains a "Buy" rating despite a slowdown in gas sales growth and ongoing pressure on connection services, with revised net profit forecasts for FY2025/26 to FY2027/28 [5]. - The current stock price corresponds to a PE ratio of 14, 12, and 11 for FY2025/26 to FY2027/28, respectively, with a stable dividend policy and a competitive dividend yield in the industry [5].

Investment Rating - The report maintains a "Buy" rating for China Gas (00384) [2][6]. Core Views - The company reported a revenue of HKD 34.481 billion for the first half of FY2025/26, a year-on-year decrease of 1.8%, and a net profit attributable to shareholders of HKD 1.334 billion, down 24.2%, which was below expectations due to a reduction in new user connections and a slowdown in industrial gas demand [6]. - Free cash flow reached a record high of HKD 2.6 billion, an increase of 17.2% year-on-year, indicating strong cash generation capabilities [6]. - The retail gas sales volume increased by 1.7% year-on-year to 17.41 billion cubic meters, although town gas sales volume decreased by 1.5% due to declining industrial gas demand [6]. - The company aims to maintain a gross margin target of HKD 0.55 per cubic meter for the full fiscal year, with potential for a slight increase compared to the previous fiscal year [6]. - The connection business continues to face pressure, with new residential user connections down 25.2% year-on-year, indicating a declining contribution to overall profits [6]. - Value-added and integrated energy businesses showed steady growth, contributing positively to the company's performance, with significant increases in commercial user-side energy storage and electricity sales [6]. - The company is actively optimizing its debt structure, resulting in a decrease in financing costs to 3.39% for the first half of FY2025/26, down 0.45 percentage points from the previous fiscal year [6]. Financial Data and Profit Forecast - Revenue projections for the upcoming fiscal years are as follows: - FY2023/24: HKD 81.41 billion - FY2024/25: HKD 79.26 billion - FY2025/26: HKD 76.37 billion - FY2026/27: HKD 72.40 billion - FY2027/28: HKD 72.60 billion [5][7]. - Net profit forecasts are: - FY2023/24: HKD 3.185 billion - FY2024/25: HKD 3.252 billion - FY2025/26: HKD 3.264 billion - FY2026/27: HKD 3.770 billion - FY2027/28: HKD 4.192 billion [5][7]. - Earnings per share (EPS) estimates are: - FY2023/24: HKD 0.59 - FY2024/25: HKD 0.60 - FY2025/26: HKD 0.60 - FY2026/27: HKD 0.69 - FY2027/28: HKD 0.77 [5][7].

Core Viewpoint - Zhongyu Energy is focusing on value-added services as a strategic pivot to extract incremental value from existing resources, enhancing user experience and quality of life through a 24/7 offline service network [1] Group 1: Event Launch and Objectives - The "Zhongyu Carnival" value-added business sales competition was launched on July 12, 2023, in Daisan, Zhejiang, marking the beginning of a focused initiative on value-added business breakthroughs [1] - The event gathered over 130 participants, including executives from the headquarters and 42 subsidiaries, to discuss the development blueprint for value-added services [2] - The competition aims for a sales target of 250 million yuan, focusing on three core areas: home decoration, gas appliances, and insurance [2] Group 2: Leadership Insights and Strategic Importance - President Peng Jun emphasized the critical role of value-added services in achieving the group's annual goals, calling for enhanced support from the customer service and smart technology divisions [6] - The company aims to break down business barriers and foster collaboration among subsidiaries to achieve the sales target, with a two-month timeline for the competition [6] - The launch of the "Zhongyu Carnival" competition reflects the company's commitment to innovative services and collaborative efforts to overcome growth challenges [6]