CICC International: Maintains "Outperform" rating on CHINA RES GAS (01193), lowers target price to HK$33

Bank of China International released a research report stating that it maintains a "outperform" rating on CHINA RES GAS (01193), with the target price lowered from 34.3 Hong Kong dollars to 33 Hong Kong dollars. Based on more conservative forecasts for gas demand and new connection volume, the bank has revised down its core profit forecast for CHINA RES GAS for the years 2024 to 2026 by 3% to 5%. It is predicted that due to weak manufacturing activity in the mainland, the growth of CHINA RES GAS in 2025 may slow down, with existing industrial customer gas sales volume expected to remain stable, while new connected industrial and commercial customers may continue to grow. However, despite weaker demand this year, Bank of China International believes that lower gas costs will drive a slight expansion in gas sales price differentials, although the magnitude will be lower than last year. It is currently expected that the expansion of gas sales price differentials and the Tianjin joint venture achieving a turnaround from losses to profits will drive a mid-single-digit profit increase in Ruanran in 2025. The bank forecasts that Ruanran's core profit last year will increase by 33% to 5.6 billion Hong Kong dollars, with dividend per share also expected to increase. Assuming an average annual operating cash flow of about 8 billion Hong Kong dollars and capital expenditure reaching 7 billion to 8 billion Hong Kong dollars in the coming years, it is believed that Ruanran, with a lower debt ratio, still has room for dividend growth in the medium term.