CICC International: Maintains "buy" rating on BINHAI INV (02886) with a target price of HK$1.43.

Guo Zheng Guoji released a research report stating that they will maintain a "buy" rating for BINHAI INV (02886). Taking into account peer valuation and industry trends, the company is forecasted to have a P/E of 8x in 2026 (assuming an exchange rate of 1 RMB = 1.15 HKD), corresponding to a target price of 1.43 HKD. The high growth in sales volume in the first quarter and attractive dividend yield are key factors. Event: The company announced its operating performance in the first quarter of 2026. The company's pipeline gas sales volume in the first quarter was 794 million cubic meters, yoy +21%; among which pipeline gas sales volume was 585 million cubic meters, yoy +23%. Previously, the company announced its full-year performance for 2025, with total revenue of 5.606 billion RMB, down 3% yoy; net profit attributable to the parent company was 206 million RMB, up 12% yoy. The company has achieved significant cost reduction and efficiency improvement, with a dividend yield of 6.9% that is quite attractive. Key points from Guo Zheng Guoji: - Achieved a good growth in sales volume in the first quarter - The company's pipeline gas sales volume in the first quarter was 794 million cubic meters, yoy +21%; including 585 million cubic meters for pipeline gas sales, yoy +23%, with sales to industrial and commercial users at 439 million cubic meters, yoy +31%, and domestic gas consumption at 146 million cubic meters, yoy +4%; gas transmission volume was 209 million cubic meters, yoy +15%. Previously, the company announced its annual performance for 2025, with sales revenue for gas sales for the full year at 5.25 billion RMB (yoy-2%); gross profit was 310 million RMB (yoy-1%). Despite the weak market conditions, the company's performance demonstrated resilience. Gas connection revenue was 220 million RMB (yoy-26%); gross profit was 120 million RMB (yoy-34%), mainly affected by the real estate industry. Natural gas transmission business revenue was 52 million RMB (yoy-17%); gross profit was 44 million RMB (yoy-18%). Value-added business achieved rapid growth, with revenue of 76 million RMB (yoy +14%); gross profit of 50 million RMB (yoy +13%). The company expects total gas sales volume to reach 2.5 billion cubic meters in 2026, with pipeline gas sales volume at 1.9 billion cubic meters (yoy +6%), and gas transmission volume at 600 million cubic meters (yoy -7%); urban gas gross margin at 0.51 RMB, adding 43,000 new connections, and a 15% increase in gross profit from value-added services. Significant cost reduction and efficiency improvement, with strong support from major shareholders In 2025, the company's financing costs were 75.2 million RMB, down 41% yoy; the average annual loan interest rate was 4.4%, a 90 bps decrease from the previous year. The company continuously optimized its debt structure, actively repaid high-interest debts, expanded financing channels, and introduced innovative financing products with several large financial institutions. The company expects a further decrease in financing costs of 10-15 million RMB this year. The company's two major shareholders, Tianjin TEDA and Sinopec Natural Gas, have signed a framework agreement on further deepening strategic cooperation to support the company's development in various aspects including gas sources, terminal markets, and clean energy projects. Annual dividend payout ratio at 51%, with an attractive dividend yield The company announced a final dividend of 8.36 HK cents per share, an increase of 0.76 HK cents from the previous year, resulting in an annual dividend payout ratio of 51%. The company also announced a three-year dividend guidance plan: based on a dividend of 0.076 HKD per share in 2024, the company plans to increase the dividend by no less than 10% annually from 2025 to 2027. Currently, the company's dividend yield is around 6.9%, which is quite attractive. Target price of 1.43 HKD, maintaining a "buy" rating The group is exploring a good implementation pathway for new energy businesses under the "dual carbon" policy, accelerating the transformation of the group into a comprehensive energy supplier. Assuming a slight increase in sales volume, a slight increase in gross margin, and a slight decrease in new connections, with peer valuation and industry trends in consideration, the company is forecasted to have a P/E of 8x in 2026 (assuming an exchange rate of 1 RMB = 1.15 HKD), resulting in a target price of 1.43 HKD, maintaining a "buy" rating. Risks: Lower-than-expected demand, significant cost increases, ongoing downturn in the real estate industry, etc.