UBS: HK & CHINA GAS (00003) core operating profit rose 4% last year as expected. Rating "Neutral"

UBS releases research report, stating that the core operating profit of HK & CHINA GAS (0003) for the 2025 fiscal year is 6 billion Hong Kong dollars, a year-on-year increase of 4%, roughly in line with the bank's and market expectations. The growth is mainly driven by steady performance in the Hong Kong gas business and a decrease in financial expenses, partially offset by a 2% decline in profits from mainland city gas due to weak new connection volumes. The bank has assigned a "neutral" rating to the gas company with a target price of 7 Hong Kong dollars. The bank notes that the profit from the mainland city gas business benefited from an increase in gross profit per cubic meter from 0.52 Hong Kong dollars to 0.54 Hong Kong dollars, but this was offset by a decrease in new connection volumes from 1.68 million households to 1.45 million households, resulting in overall stable gas sales volume. The loss from the green fuel business segment also narrowed to 1.58 billion Hong Kong dollars. UBS expects investors to have a neutral to slightly negative view on the performance. Therefore, the bank maintains a largely neutral position on the industry, believing that the growth in city gas sales volume will slow down and that fluctuating upstream prices may pose short-term profitability pressure. However, UBS has a positive outlook on the development of EcoCeres, noting that its capacity expansion is faster than expected, which may accelerate order absorption and attract strategic investors.