JP Morgan upgrades KUNLUN ENERGY (00135) rating to "overweight" with a target price increased to HK$8.68.

JP Morgan has released a research report stating that KUNLUN ENERGY (00135) has been upgraded from "Neutral" to "Hold", with a target price raised from 8.25 Hong Kong dollars to 8.68 Hong Kong dollars. It is also now the preferred choice in the industry along with ENN ENERGY (02688). From a valuation and earnings perspective, in the next three months, the bank prefers KUNLUN ENERGY over CHINA RES GAS (01193). Morgan Stanley believes that the pullback in KUNLUN ENERGY's stock price provides an attractive entry point, as the current valuation is equivalent to a forecasted price-to-earnings ratio of less than 9 times for the next year, with a yield of over 5%. There are two potential catalysts in the future, including a possible decrease in industry procurement costs due to a global drop in oil and natural gas prices, and the fact that around 70% of KUNLUN ENERGY's natural gas sales come from the industrial sector, which may benefit from potential stimulus measures in China. The company mentioned that KUNLUN ENERGY's management has promised to increase the dividend payout ratio by 2 to 3 percentage points annually to 45% between 2023 and 2025. With net cash of approximately 20 billion RMB on hand, the dividend payout ratio is expected to further increase. This implies a compound annual growth rate of over 10% in dividend payout per share over the period.