Investment Rating - The report maintains a "Buy" rating for Kunlun Energy [9] Core Views - The company is expected to achieve dual growth in profitability and dividends, leading to a revaluation of its long-term value [3] - The company has outlined its core business operational trends and significant progress, including retail gas volume growth, LNG industry chain synergy, LPG sales, and crude oil performance [3] Summary by Relevant Sections Business Performance - Retail gas volume growth for the first nine months is expected to return to 5%, driven by high single-digit growth from industrial users [4] - The LNG receiving station is projected to operate at an annual load factor of 85%-90% [4] - LPG sales showed high single-digit growth in the first nine months, with a slight increase expected for the full year [4] - Crude oil production is anticipated to stabilize at 8 million barrels for the year [4] Margin and Cost Trends - The gross margin for the first half was 0.44 RMB per cubic meter, a slight year-on-year decrease of 0.01 RMB, influenced by gas station integration and promotional strategies for industrial users [4] - A stable to slightly increasing gross margin is expected in the second half due to cost optimization in winter [4] - Long-term demand for gas is expected to remain robust, supported by the dual carbon goals and industry pricing mechanisms [4] Long-term Planning and Non-gas Business - The company has clarified its long-term focus on five strategies: innovation, green energy, market, capital, and low cost [5] - The company aims to become a leading comprehensive energy supplier in China, with a natural gas terminal market share expected to match upstream supply [5] - The Shandong 380,000 kW onshore wind power project is planned to be operational by Q3 2026 [5] Dividend Policy - The interim dividend is set at 0.166 RMB per share, reflecting a year-on-year increase of 1.2%, with a payout ratio of 45.5% [4] - The current stock price corresponds to a 2025 estimated dividend yield of 4.8% [4] - The dividend policy for 2023-2025 is expected to be steadily implemented, with a more positive outlook for 2026-2028 [4] Profit Forecast and Valuation - The report maintains the forecast for the company's net profit attributable to the parent company at 6.15 billion, 6.49 billion, and 6.84 billion RMB for 2025-2027, respectively [6] - The target price is set at 8.58 HKD, based on an 11x PE for 2025E and an exchange rate of 0.91 for HKD to RMB [6]

Investment Rating - The investment rating for the company is "Buy" [1] Core Views - The company's retail gas business shows steady growth, although the growth rate has slowed down. In Q3 2025, retail gas volume reached 6.24 billion cubic meters, a year-on-year increase of 2.1% [5] - The company is progressing well with its privatization plan, which is expected to enhance upstream and downstream integration and collaboration after completion [5] - The company has a total of 8.7 million tons of overseas long-term contracts expected to be executed from 2025 to 2029, supporting robust growth in direct sales gas business [5][8] - The company plans to maintain a cash dividend ratio of no less than 50% of core profit from 2026 to 2028, which is expected to enhance the company's value [6] Financial Performance Summary - For the first three quarters of 2025, the company achieved operating revenue of 95.856 billion yuan, a decrease of 2.91% year-on-year, and a net profit attributable to shareholders of 3.426 billion yuan, a decrease of 1.87% year-on-year [2] - In Q3 2025, the company reported operating revenue of 29.865 billion yuan, a decrease of 5.93% year-on-year, and a net profit attributable to shareholders of 1.018 billion yuan, an increase of 5.89% year-on-year [3] - The company’s core profit for the first three quarters of 2025 was 3.777 billion yuan, a decrease of 1.04% year-on-year, while the basic earnings per share (EPS) was 1.23 yuan [2] Business Segment Performance - Retail gas volume for the first three quarters of 2025 was 19.19 billion cubic meters, a year-on-year increase of 2.0%, with industrial and commercial gas volume at 15.21 billion cubic meters, up 2.5% [5] - Platform gas volume declined, with Q3 2025 platform transaction gas volume at 1.26 billion cubic meters, down 7.1% year-on-year [5] - The company’s diversified energy business saw steady expansion, with total sales volume of 28.99 billion kilowatt-hours in the first three quarters of 2025 [5]

Core Viewpoint - The company reported its Q3 2025 results, showing a slight decline in revenue and net profit year-on-year, but a positive growth in net profit for Q3 compared to the previous year, indicating a mixed performance amidst fluctuating gas prices and demand [1][2]. Financial Performance - For the first nine months of 2025, the company achieved a revenue of 95.856 billion yuan, a year-on-year decrease of 2.91%, and a net profit attributable to shareholders of 3.426 billion yuan, down 1.87% year-on-year [1]. - In Q3 2025, the net profit attributable to shareholders was 1.018 billion yuan, reflecting a year-on-year increase of 5.89%, while the core net profit decreased by 6.89% to 1.041 billion yuan [1]. Sales and Market Dynamics - The company sold 3.95 billion cubic meters of platform trading gas in the first nine months, a decrease of 2.7% year-on-year, with a notable adjustment in trade flow due to falling international gas prices and rising domestic demand [1][2]. - International gas sales reached 1.43 billion cubic meters, with a quarter-on-quarter increase of 270 million cubic meters, while domestic gas sales grew by 9.9 million cubic meters to 2.52 billion cubic meters [2]. Retail Gas Trends - Despite a national decline of 0.2% in apparent natural gas consumption, the company's retail gas volume increased by 2.0% year-on-year to 19.19 billion cubic meters, with industrial and commercial gas growth outpacing residential gas growth [2]. Infrastructure and Strategic Developments - The Zhoushan receiving station's unloading volume increased by 14.2% year-on-year to 1.98 million tons, with the company enhancing its capabilities through various service models [3]. - The company has completed the acquisition of a 10% stake in Zhoushan, making it a wholly-owned subsidiary, which is expected to contribute more to the company's net profit [3]. Privatization and Future Outlook - The ongoing privatization of the Hong Kong subsidiary, New World Energy, is expected to enhance shareholder returns post-asset restructuring, with a planned cash dividend of at least 50% of core profit from 2026 to 2028 [3]. - The company has adjusted its net profit forecasts for 2025-2027 to 4.825 billion, 5.755 billion, and 6.387 billion yuan, reflecting a decrease due to lower overseas resale gas volumes and narrowing margins [4].

Core Viewpoint - CMB International has downgraded the valuation of Xin'ao Energy (02688) to a 10x forecast P/E ratio from the previous 11x, with the base year moved to 2026, and adjusted the target price from HKD 74.6 to HKD 73.66 while maintaining a "Buy" rating [1] Financial Performance - Xin'ao Energy's core profit for the first half of the year decreased by 1% year-on-year to RMB 3.2 billion, aligning with market expectations [1] - The company is expected to see a 2.2% year-on-year increase in retail gas volume for the full year of 2025, with a 2.5% increase in the second half [1] - The gross margin for the retail gas segment is projected to be 10% [1] Business Outlook - The number of new residential connections is expected to decline by 8% year-on-year to 1.49 million, with the downward trend further slowing [1] - In the energy sales segment, a slight recovery is anticipated in the fourth quarter due to normalized heating demand, with an overall year-on-year increase of 4% in energy sales for the year [1] Earnings Forecast - Due to weakened retail gas volume and energy business demand, CMB International has reduced the company's earnings forecasts for the next two years by 0.1% and 1.8% respectively, with a projected compound annual growth rate of approximately 4% for earnings from 2024 to 2027 [1]

Group 1 - The core profit of the company slightly decreased by 1% year-on-year to 3.2 billion RMB, in line with market expectations [1] - Retail gas sales increased by 1.9% year-on-year, with commercial and residential gas sales growing by 2.4% and 1.3% respectively, while the retail gas gross margin remained stable at 10.2% [1] - The total installed capacity and operational capacity of the company's diversified energy business reached 15 GW and 13.9 GW, representing year-on-year growth of 9.2% and 8.5% respectively [1] Group 2 - The company expects a slight recovery in heating demand in the second half of 2025, predicting a 2.2% year-on-year increase in retail gas volume for the entire year [2] - The gross margin for the retail gas segment is anticipated to be around 10%, with new residential connections expected to decline by 8% to 1.49 million households [2] - The company has adjusted its earnings forecast for 2025 and 2026 down by 0.1% and 1.8% respectively, with a compound annual growth rate of approximately 4% from 2024 to 2027 [2]

Summary of Industrial Gas Industry Conference Call Industry Overview - The conference call discusses the industrial gas industry, particularly focusing on the impact of supply-side reforms and current anti-involution policies on the market dynamics and pricing of industrial gases such as liquid oxygen, nitrogen, and argon [1][3][4]. Key Points and Arguments - **Supply-Side Reforms Impact**: The previous round of supply-side reforms led to a 13% reduction in steel production capacity from 1.13 billion tons to 980 million tons, causing a contraction in industrial gas supply and a subsequent price increase due to demand stimulation [3][13]. - **Current Market Dynamics**: The current anti-involution policies may replicate similar effects as past reforms, potentially leading to a reduction in excess capacity in the industrial gas sector, contingent on demand support [1][24]. - **Price Trends**: Retail gas prices are at a ten-year low, with liquid oxygen prices dropping to around 350 RMB per ton, which does not cover cash costs. The market is undergoing an automatic exit process, with prices expected to stabilize and possibly recover moderately in the future [18][19][20]. - **Demand from Solar Industry**: The solar industry has significantly increased the demand for liquid argon, although the beta of this sector has weakened, leading to a sharp decline in argon prices [10][14]. - **Pipeline Gas Market**: The pipeline gas market is influenced by capital expenditures in the steel and chemical industries. There are signs of recovery in capital spending, which may lead to an increase in new contracts [9][21]. Additional Important Insights - **Capacity Utilization Trends**: From 2016 to 2018, the capacity utilization rates for liquid oxygen, nitrogen, and argon increased from 60% to 64%-65%. However, from 2021 to 2023, these rates declined due to the pandemic and economic conditions [8][17]. - **Market Structure Changes**: The structure of gas demand is changing, with a decrease in the proportion of liquid oxygen used in metallurgy and an increase in demand from emerging industries like lithium battery materials [15][16]. - **Future Price Projections**: Future price increases for retail gases are expected to be moderate, with potential growth of 5% to 10% annually, which could significantly improve profitability for companies like Hangyang [20][23]. - **Impact of Anti-Involution Policies**: The anti-involution policies are expected to benefit companies closely linked to steel and chemical industries, such as Hangyang, Shandong Gold, and others, by reducing excess supply and improving market conditions [24][25]. This summary encapsulates the critical insights and projections regarding the industrial gas industry as discussed in the conference call, highlighting the interplay between supply-side reforms, market dynamics, and future trends.

Investment Rating - The investment rating for the company is "Buy" [1] Core Views - The company is experiencing steady growth in core profits despite a slight decline in overall revenue and net profit for the first half of 2025. The core profit reached 2.736 billion yuan, a year-on-year increase of 1.38% [1][2] - The privatization process of the company is progressing smoothly, which is expected to enhance upstream and downstream integration and collaboration after the transaction is completed [3][4] - The company has signed a long-term gas supply agreement with Chevron, which is anticipated to significantly boost its direct sales gas business [3][4] Financial Performance Summary - For the first half of 2025, the company reported total revenue of 65.991 billion yuan, a decrease of 1.47% year-on-year, and a net profit attributable to shareholders of 2.408 billion yuan, down 4.82% year-on-year. However, the net profit after deducting non-recurring items increased by 21.13% year-on-year [1] - In Q2 2025, the company achieved revenue of 32.262 billion yuan, a year-on-year decrease of 1.54%, but a net profit of 1.431 billion yuan, which represents a year-on-year decrease of 1.23% but a quarter-on-quarter increase of 46.58% [2] - The company’s retail gas sales volume for the first half of 2025 was 12.95 billion cubic meters, a year-on-year increase of 1.9%, with industrial and commercial users accounting for 75.6% of the total [3] - The company’s projected core net profits for 2025-2027 are 5.695 billion yuan, 6.399 billion yuan, and 7.107 billion yuan, respectively, with corresponding EPS of 1.84 yuan, 2.07 yuan, and 2.29 yuan [6][8]

Investment Rating - The report maintains a "Buy" rating for the company [2] Core Insights - The company reported a total revenue of 66.015 billion yuan in H1 2025, a year-on-year decrease of 1.47%, while the net profit attributable to shareholders was 2.408 billion yuan, down 4.82%. However, core profit increased by 1.4% to 2.736 billion yuan, aligning with expectations [7] - The platform trading gas market showed resilience, with sales volume reaching 2.689 billion cubic meters in H1 2025, only a slight decline of 0.6% year-on-year, despite a 20.6% drop in LNG imports [7] - Retail gas volume grew by 1.9% year-on-year to 12.95 billion cubic meters, outperforming the industry average, with retail gas revenue of 33.627 billion yuan and a gross profit of 4.69 billion yuan, up 2.3% [7] - The Zhoushan receiving station's unloading volume increased by 11.7% year-on-year to 1.137 million tons in H1 2025, with plans for further capacity expansion [7] - The company's total liabilities decreased to 29.736 billion yuan, with a net debt ratio of 21.2%, down 3.3 percentage points year-on-year, indicating improved financial health [7] - The privatization of the subsidiary, Xin'ao Energy, is progressing, with plans for annual cash dividends of no less than 50% of the core profit, which is expected to enhance shareholder returns [7] - Profit forecasts for 2025-2027 are set at 5.155 billion, 6.419 billion, and 7.104 billion yuan respectively, with corresponding PE ratios of 11, 9, and 8 times [7] Financial Data and Profit Forecast - Total revenue for 2025 is estimated at 136.829 billion yuan, with a year-on-year growth rate of 0.7% [6] - The net profit attributable to shareholders for 2025 is projected to be 5.155 billion yuan, reflecting a year-on-year increase of 14.7% [6] - The earnings per share for 2025 is expected to be 1.66 yuan, with a gross margin of 14.2% [6]

Core Viewpoint - The report from CMB International indicates a downward revision of Kunlun Energy's (00135) profit forecasts for the next two years by 8% and 10% due to a decline in retail gas sales growth predictions [1] Financial Performance - Kunlun Energy's profit for the first half of the year decreased by 4.4% to 3.16 billion RMB, achieving only 45% of the original annual forecast [1] - The company's core profit is expected to remain stable at approximately 6.4 billion RMB this year, with projected year-on-year growth of 5.5% and 6.3% for 2026 and 2027 respectively [1] - The interim dividend increased by 1.2% year-on-year, with a payout ratio of 45.46%, slightly above the annual payout guidance [1] Sales and Growth Projections - Despite low growth in retail gas volume, the company added five city gas projects in the first half and expects to acquire another five projects in the second half, which will enhance annual gas volume contributions [1] - The company anticipates that the retail gas volume growth rate in the second half will be higher than that of the first half, with an expected year-on-year increase of 4.5% for the year, compared to the company's guidance of 5% [1] - The expected gross margin for gas sales is projected to remain at 0.44 RMB per cubic meter, while LNG processing volume is expected to increase by 1.6% year-on-year [1] Profitability of LNG Segment - The tax-pre profit for the LNG segment is projected to double to 260 million RMB this year, with a year-on-year increase of 8.9% [1]

Core Viewpoint - The report from CMB International indicates a downward revision of Kunlun Energy's profit forecasts for the next two years by 8% and 10%, reflecting a decrease in retail gas sales growth expectations [1] Financial Performance - Kunlun Energy's profit for the first half of the year decreased by 4.4% year-on-year to 3.16 billion RMB, achieving only 45% of the original annual forecast [1] - The pre-tax profit from the gas sales business fell by 10.6%, which was the main reason for the performance being below expectations [1] - The company declared a mid-year dividend that increased by 1.2%, with a payout ratio of 45.46%, slightly above the annual payout guidance [1] Future Projections - The core profit for this year is expected to remain stable at approximately 6.4 billion RMB, with projected year-on-year growth of 5.5% and 6.3% for 2026 and 2027, respectively [1] - Despite low growth in retail gas volume, the company has added five city gas projects in the first half and expects to acquire another five projects in the second half, which will enhance annual gas volume contributions [1] - The company anticipates that the retail gas volume growth rate in the second half will be higher than that of the first half, with an expected year-on-year increase of 4.5% for the year [1] Price Target and Rating - The target price for Kunlun Energy has been adjusted from 9.02 HKD to 8.85 HKD, although the dividend yield remains attractive, and the company continues to hold a "Buy" rating [1]