BINHAI INV (02886) Performance Shines, Development Prospects Attract Imagination.

BINHAI INV (02886) handed in an impressive report card in 2025, with steady improvement in operating strength throughout the year. Core financial indicators achieved growth, and the resilience of the main business was evident. In the overall weak domestic natural gas industry environment, the company achieved breakthroughs in sales volume, profit, and shareholder returns through refined operating strategies and resource integration. At the same time, it laid a solid foundation for development in 2026 by expanding value-added services, optimizing the industrial chain, and the overall development prospects are promising. Firstly, the company's profitability in 2025 saw steady growth, with continuous enhancement in shareholder return capabilities. The company achieved a net profit attributable to equity holders of RMB 206 million, a significant increase of 12% year-on-year; net profit reached RMB 212 million, an increase of 10%, and basic earnings per share reached RMB 15.0, an 11% increase from 2024. The steady climb in profitability reflects the company's optimized operational efficiency and cost control capabilities. In terms of shareholder returns, the company fulfilled its dividend policy commitment, with a proposed dividend of HK$0.0836 per share for 2025, a 10% increase year-on-year. The company has consistently paid dividends for 13 years, with a dividend payout ratio of over 50% in the past two years, and an average dividend yield of 7%. This stable dividend policy provides shareholders with ongoing substantial returns and demonstrates the company's confidence in business development. The company previously provided a dividend guidance for 2025-2027, based on the 2024 dividend of HK$0.076 per share, with an annual increase of no less than 10%. It is expected that the dividend per share for 2026 and 2027 will reach HK$0.091 and HK$0.1 respectively, with continued improvement in shareholder returns expected. In addition to the core natural gas sales business, the company's performance far exceeded the industry average, with sales volume increasing against the trend. While national natural gas apparent consumption increased by only 0.1% in 2025 and overall industry demand was weak, BINHAI INV achieved a 4.5% increase in pipeline gas sales volume for the whole year, reaching 1.79 billion cubic meters, with transmission gas volume of 650 million cubic meters, and a total sales volume of 2.44 billion cubic meters, demonstrating strong business resilience. Despite a slight decline in sales volume in the first quarter of 2025 due to a warm winter, there was a rebound in the second to fourth quarters, with a 23% year-on-year increase in pipeline gas sales, driving overall business close to performance budget targets. The growth in pipeline gas sales volume was supported by a dual increase in new customer deployment and existing customer demand; new customers like Zhaoyuan Thermal Power Plant and Beifang Glass were put into operation, while existing customers in the automotive manufacturing industry and dual-supply customers saw an increase in gas demand, providing a solid support for the growth in sales volume. Additionally, the company's cumulative customer base reached 2.484 million households, a 2% increase year-on-year, further expanding the business growth space. Moreover, the continuous repair and stability of the group's gross margin level has become an important support for the company's business profitability. In 2025, the company's average gross margin for urban gas returned to RMB 0.51 per cubic meter, an increase of RMB 0.03 per cubic meter year-on-year, reflecting the repair of the gross margin level stemming from the simultaneous optimization of upstream procurement costs and downstream price reform. At the upstream end, the company implemented a diversified procurement strategy to balance market demand and upstream resources, taking full advantage of the market characteristics where domestic natural gas supply exceeds demand, opportunistically purchasing social resources with more advantageous prices, resulting in savings of approximately RMB 50 million in gas procurement costs for the year. On the downstream end, the company actively promoted residential gas price reforms, with 4 new subsidiaries completing residential gas price adjustments in 2025, covering a total of 19 operating areas with price adjustments, accounting for approximately 83% of the total civil gas volume, fostering a positive undercutting effect where the price reduction for commercial gas sales was less than the reduction in procurement costs, leading to a notable restoration in the gross margin of urban gas, with plans to stabilize this gross margin level in 2026 and provide continuous guarantees for business profitability. Apart from the core gas business, the company achieved rapid growth in value-added services, becoming a new engine for performance growth, while financial management was significantly effective, further strengthening the operational foundation. Value-added services were officially incorporated into the main business in 2025, with total revenue reaching RMB 76.146 million for the year, a 14% year-on-year increase, and a gross profit of RMB 50.46 million, a 13% year-on-year increase, with a comprehensive gross profit margin as high as 66%. Faced with the decline in demand for installation services due to the real estate environment, the company promptly launched new businesses such as kitchen decoration and security products, launched the e-commerce platform "Taiyue Home Life Pavilion," enriched product and service categories, and cooperated with multiple gas companies and well-known real estate enterprises, breaking through service boundaries. In terms of financial management, the company proactively repaid high-interest debts and optimized debt structure, reducing the average financing interest rate to 4.4% in 2025, a 90 basis point decrease year-on-year, reducing financing costs by approximately RMB 53 million, a 41% decrease. At the same time, accounts receivable decreased by 24%, operating net cash flow increased by 12%, the asset-liability ratio slightly decreased to 69.7%, and the financial structure continued to optimize, providing sufficient financial support for business development. It is expected that the company's business outlook will continue to improve in 2026, with multi-dimensional layouts opening up a new stage of high-quality development. In terms of business goals, the company plans for a 2% increase in total gas volume, with a 6% increase in pipeline gas sales volume, a 15% increase in gross profit for value-added services, and further reduction of financing costs by RMB 10-15 million. In terms of gas procurement, the company will continue to implement a diversified procurement strategy, optimize gas source structure, and expect comprehensive procurement costs to stabilize or decrease; for value-added services, the company plans to further promote kitchen decoration business, launch self-developed civilian security products such as AI safety valves, expand sales channels for gas appliances, and expand services to include water purification, heating, etc., aiming to become a comprehensive urban life service provider. In addition, the company's technology sector made breakthroughs with a new calibration laboratory set to open to the public, self-developed products reaching B-end, G-end, and C-end, further enriching the business ecosystem. Furthermore, the strong support of shareholder resources empowers the company's development. The company's largest shareholder, Taida Holdings, the second largest shareholder, Sinopec Natural Gas, signed a strategic cooperation agreement with the company, providing comprehensive support in gas source security, terminal market expansion, liquefied natural gas receiving station utilization, clean energy project cooperation, carbon asset management, and promoting the construction of the integrated gas marketing network in Binhai New Area. At the same time, Sinopec Natural Gas plans to increase investment and strategic resource allocation to further expand the company's business and improve the industrial chain, providing solid backing for the company's business expansion. Currently, the company's gas business has been expanded to eight provinces and two cities nationwide, with over 40 operating units. The management team possesses rich experience in the energy industry management and professional qualifications, with strict governance standards providing organizational and management support for sustained and steady business development. In conclusion, BINHAI INV achieved impressive growth in profitability, business scale, and shareholder returns in core dimensions in 2025, with steady improvement in gross margin levels, optimized financial structure, and potential unleashed growth in value-added services, fully demonstrating strong operational resilience and development vitality. The company's business goals for 2026 are clear, with the industry chain layout continuously improving, supported by strong shareholder resources and industry development opportunities, the company has sufficient momentum for business growth, offering a bright long-term outlook with the potential for dual improvement in performance and shareholder returns. With a dividend yield of approximately 6.5% for the company's valuation, the short-term target price is set at 1.3 RMB, and if Sinopec continues to assist in securing gas sources, expanding terminal markets, comprehensive energy projects, etc., the medium to long-term target price may reach 1.7 RMB. This article is reprinted from "ADSAC Finance" by Zhang Zhiwei; GMTEight editor: Feng Qiuyi.