Profit quality and high dividend support Binhai Inv (02886) can "benefit from all sides".

In the year 2025, when the macroeconomic growth slowed down, energy prices fluctuated, and the real estate market still needed repair, urban gas companies generally faced the operating environment of "stable quantity and price pressure, cost disturbance". However, BINHAI INV (02886) was able to deliver a "profit optimization" report card even in the background of a slight decline in income, showing that its operating structure and financial management capabilities are playing a key role. According to the group's just released full-year performance for 2025, the group achieved revenue of approximately RMB 5.606 billion, a slight decrease of 3% year-on-year. On the surface, this may seem like a moderate decline, but the net profit attributable to the parent company reached approximately RMB 206 million, an increase of 12% year-on-year, with basic earnings per share of approximately RMB 0.15. This "revenue decline, net profit increase" structural differentiation reflects improvements in costs and financial aspects. Although the group's full-year gross profit was approximately RMB 520 million, a decrease of 11% year-on-year, the main reason for the decrease in gross profit was the decrease in gross profit from engineering construction and natural gas pipeline installation services. However, the net profit increased against the trend, with the core driver coming from two aspects, including a significant decrease in financial costs of approximately RMB 53 million year-on-year, with the average loan interest rate dropping from 5.3% to 4.4%. In the background of stable interest rates and optimized financing structure, financial leverage efficiency has significantly improved. In addition, the contribution of high-gross-margin value-added services has increased, making the overall profit structure more balanced and offsetting the pressure on the main business gross profit margin. In other words, the group is gradually moving from a "scale-oriented" to a "structure-oriented" profit model. Stable progress in core business: Industrial customers are the cornerstone In terms of revenue structure, pipeline gas sales still account for approximately 94% of total revenue. In 2025, the volume of gas sold through pipelines was approximately 1.79 billion cubic meters (total gas sales of approximately 2.44 billion cubic meters), an increase of approximately 4.5% year-on-year. Despite the lack of significant macroeconomic demand recovery, the company was able to achieve steady growth, demonstrating that downstream customer expansion and structural optimization are effective. It is worth noting that the sales of gas to industrial and commercial users account for approximately 82%. A higher proportion of industrial and commercial gas sales usually implies a higher customer concentration and stability. In addition, the price adjustment mechanism is relatively flexible, with a gross profit margin protection capability, as the gross margin increased by three cents year-on-year to RMB 0.51. This provides support for the company's cash flow stability and profit predictability. As for engineering construction and natural gas pipeline installation services, they are still affected by the sluggish real estate market on the mainland and fluctuations in downstream investments, with limited short-term visibility. However, the company has seized the opportunity of the policy for the renovation of old residential communities to continuously obtain new residential connections, with the total number of users increasing to approximately 2.484 million households, a 2% year-on-year growth, and the customer base continues to expand. Value-added services: A potential engine for profit growth If we were to look for the most structurally significant sector in this financial report, it would undoubtedly be the value-added services business. In 2025, the revenue of this sector was approximately RMB 76.14 million, with a gross profit margin as high as 66%, and a profit of approximately RMB 50.46 million. The five-year compound growth rate was approximately 34%. These figures reveal two signals: first, although the scale is still small, the profit potential is very strong; second, the growth curve has preliminarily verified the feasibility of the business model. The company expanded sales channels through its own brand "Tai Yue Jia," e-commerce platforms, and live streaming channels, attempting to transform "gas inlet flow" into extended family consumption scenes. If the mature market model can be replicated in other regions, increasing penetration and customer unit price, this sector may become an important driving force for profit in the coming years. From a valuation perspective, the improvement of this business segment will help the market reassess its profit structure, rather than just measuring it by traditional urban gas company multiples. Current status of cooperation with Taida in urban renewal projects The major shareholder Taida (holding approximately 42.23%) has extended its support from the equity level to the specific implementation of urban renewal projects. In 2025, Taida Urban Renewal and BINHAI INV signed a strategic cooperation agreement, focusing on the "good house" standard and external expansion, prioritizing the application of products and services of Tai Yue Jia in gas appliances, smart security systems, and kitchen decoration design and construction in various urban renewal, residential, commercial, and public buildings developed, constructed, and operated by Taida Urban Renewal and its affiliates. However, the real estate market is still in a slow recovery phase, and urban renewal projects are still affected by policy pace, local fiscal conditions, and real estate market fluctuations. The future progress and actual returns will still depend on the prudence of project implementation and cash flow arrangements. Management's guidance and key to implementation in 2026 The 2026 guidance shows that management will focus on three areas: consolidating the gas sales core business, increasing the proportion of value-added services, and promoting the transformation into a comprehensive energy service provider. The group aims to achieve a 2.5% increase in gas sales volume for the whole year, strive for a 15% year-on-year increase in the gross profit of value-added services, maintain approximately the same number of new connections, and commit to an annual dividend growth rate of no less than 10% from 2025 to 2027. Dividend payment commitment to drive market imagination BINHAI INV's stock price made multiple attempts to break through 1.76 Hong Kong dollars from March to August 2023, gradually forming a medium-term resistance level, followed by a correction and dropping to a level of 0.86 Hong Kong dollars in August and September 2024 before rebounding. The subsequent rebound once touched the 38.2% retracement zone of the entire decline, but faced resistance multiple times near 1.20 Hong Kong dollars, indicating that this range has become the main current pressure level. From a technical perspective, 0.86 Hong Kong dollars is a significant medium-term support, while 1.20 Hong Kong dollars is a short-term dividing line for longs and shorts. If it cannot effectively break through, the stock price may still need time to consolidate. In terms of dividends, management has proposed an annual dividend growth rate of no less than 10% from 2025 to 2027. With a dividend of 8.36 Hong Kong cents in 2025, it can be estimated that the predicted dividends for 2026 and 2027 would be approximately 9.1 and 10 Hong Kong cents, respectively. Based on the current price, the dividend yield is approximately 8 to 9 cents, which is relatively high in the utilities and income sectors. If the market's reasonable expectation for stable dividend-paying assets is a dividend yield of about 5 to 6 cents, the corresponding fair value would be around 1.40 Hong Kong dollars. In the short term, it remains to be seen if the stock price can stand firm above 1.20, while in the long term, it depends on the dividend payment commitment. This article is reproduced from "Hong Kong 01" and written by Peng Weixin; GMTEight Editor: Liu Jiayin.