Morgan Stanley: Mid-term performance of gas stocks is flat, KUNLUN ENERGY (00135) will outperform industry peers.

Morgan Stanley released a research report stating that CHINA GAS HOLD's performance in the utility sector in the first half of the year was flat, with natural gas demand remaining the same as the same period last year. LNG imports saw a significant decrease, similar to the situation in 2022, due to factors such as a mild winter, high base numbers, and falling coal prices, leading to weak growth in industrial gas consumption during the period. Although residential gas prices were raised by about 5% to 8%, leading to a slight improvement in sales gas price differentials, new connection business continued to drag down profits. Morgan Stanley expects that the mid-term profits of urban gas companies will generally remain flat, with KUNLUN ENERGY (00135) outperforming its peers and CHINA RES GAS (01193) underperforming relatively, due to weak connection and integrated service businesses. They have revised their profit forecasts for the next two years for CHINA RES GAS by 30% to 35%, lowering the target price from the original 30 Hong Kong dollars to 19.2 Hong Kong dollars, and rating it as "in line with the market." Morgan Stanley is optimistic about KUNLUN ENERGY's growth prospects, low valuation, and high-quality balance sheet, predicting that its profit growth in the first half of the year will reach low single digits, and rating it as "outperforming the market". They also believe that high-yield stocks such as CHINA GAS HOLD (00384) and HK & CHINA GAS (00003) will continue to be popular among investors.