BINHAI INV (02886) Performance Shines: Sales Volume Increases, Profit Improvement May Drive Stock Price Rebound

BINHAI INV (02886) is a city gas stock that is relatively undervalued by the market. The group primarily operates in mainland China, engaging in pipeline natural gas sales, gas engineering installation, pipeline transportation services, and value-added services, all of which are closely related to residential life and industrial and commercial gas usage. In simple terms, BINHAI INV is an operator that delivers natural gas to households, factories, and businesses. It has the stability of a utility while also benefiting from the broader trend of energy transition in mainland China. The natural gas industry did not have a smooth first half of this year. National gas consumption was under pressure due to slow economic recovery, fluctuating industrial demand, and external energy price volatility. However, the fact that BINHAI INV was still able to achieve growth despite the challenging environment is particularly commendable. In the long run, mainland China needs to promote cleaner energy, and natural gas is a key energy source with lower pollution compared to coal, serving important roles in industrial, commercial, heating, and residential sectors. As the "dual carbon" policy continues to progress, urban gas companies still have mid to long-term development potential. Within the industry, BINHAI INV demonstrates clear advantages. Backed by major shareholders Tianjin TEDA and Sinopec, the group enjoys support in gas supply, project expansion, and financing arrangements. The urban gas sector emphasizes pipeline networks, customer relationships, and cost control. BINHAI INV has been deeply cultivating surrounding regions such as Tianjin, Hebei, Shandong, and the south for many years, establishing a solid user base. Compared to typical new entrants, companies with existing networks and customers like BINHAI INV have greater defensive strength and are better positioned to release profit elasticity when gas volumes increase. In its interim results for the six months ending in June 2026, the group reported revenue of 2.94 billion yuan, an 8% year-on-year increase; gross profit was 296 million yuan, up 3% year-on-year; net profit was 184 million yuan, rising 12% year-on-year; and the profit attributable to shareholders was approximately 180 million yuan, marking a year-on-year growth of about 12.5%. Despite a weak real estate market and pressures on engineering installation operations, the group was still able to increase its revenue and profits, reflecting remarkable resilience in its core gas sales business. In terms of core business revenue, BINHAI INV performed quite robustly in the first half of the year. Although revenue from engineering contracting and pipeline installation dropped due to the sluggish real estate market, this segment's contribution to overall revenue has declined compared to the past, limiting its adverse impact. In contrast, revenue from pipeline natural gas sales rose to 2.805 billion yuan, a 10% year-on-year increase, becoming the primary driver of revenue growth. This reflects the group's income structure shifting towards the more stable gas sales business, rather than relying on new connection projects that are more affected by the real estate cycle. For investors, the ability of main revenue to grow in unfavorable conditions indicates the defensiveness of the group's core business and lays a solid foundation for future profit improvements. The standout highlight of this performance was the total gas sales volume of approximately 1.204 billion cubic meters in the first half of the year, an increase of 5.6% year-on-year; among this, the pipeline natural gas sales volume was approximately 922 million cubic meters, which grew by 11.2% year-on-year. Against the backdrop of weak national gas demand, BINHAI INV's gas sales volume still managed to rise, indicating that the gas demand in the group's service areas remains relatively stable, supported by a solid base of residential and industrial customers. The increase in gas sales volume not only contributes to revenue growth but also enhances pipeline utilization efficiency. Once the gas pipeline is in place, fixed costs already exist, and as the volume of gas transported and sold increases, the cost per unit can decrease, naturally improving profitability. Another noteworthy factor is the improvement in urban gross margins. Urban gross margin can be simply understood as the difference between the selling price of gas and the cost of purchasing gas. A wider gross margin indicates that the group can earn more for each cubic meter of natural gas sold. In the first half of the year, BINHAI INV improved urban gross margins by optimizing gas source procurement, controlling costs, and stabilizing end-user sales. For gas stocks, this is a crucial profitability indicator, as an increase in gas volume combined with improved gross margin will result in a "volume and price elevation" effect. The increase in gross profit also confirms this situation. The group's gross profit in the first half rose to 296 million yuan, and while the overall increase was only 3%, it reflects the strong performance of the core pipeline natural gas sales business, especially considering the noticeable decline in engineering contracting and pipeline installation revenues. The gross profit from the pipeline natural gas sales segment saw a significant year-on-year increase, becoming the core driver of overall profitability. In other words, the group has shifted from being reliant on new connections in the past to steadily depending on gas sales and improving gross margins for profit generation, indicating a better quality of profitability than before. Net profit growth is equally appealing. In the first half of the year, net profit increased by 12% year-on-year, with the profit attributable to shareholders rising by approximately 12.5%, a significant increase that outpaced the growth rate of gross profit. This reflects not only improvements in its core business but also effective cost and financial management. If financing costs can decrease further, this would enhance profit performance. For investors, the key takeaway is not just a single quarter of improvement, but the simultaneous enhancement of gas sales volume, gross margin, gross profit, and net profit, which often marks the onset of a revaluation in stock prices. Looking ahead to the second half, BINHAI INV deserves market attention. The traditional gas sales business provides steady cash flow, and value-added services are also being integrated and expanded, evolving from small-scale installations, gas sales, insurance sales, and non-residential maintenance services into home services, smart home initiatives, insurance businesses, and extended maintenance, thus increasing the value per customer. Although comprehensive energy, photovoltaic, and low-carbon projects remain in the nurturing stage, their direction aligns with mainland energy policies and are expected to provide new growth points for the group in the long term. In terms of technical analysis and investment strategy, BINHAI INV's stock price once surged significantly in April this year, reaching a high of 1.27 Hong Kong dollars, the highest since July 2024. Although it could not maintain that level and subsequently stabilized at around 1.05 Hong Kong dollars, it has not fallen below the 1.00 Hong Kong dollar mark. The 9-day RSI has successfully stabilized above 30, indicating that the overall stock price momentum remains strong. The recent interim results showing increased total gas sales volume and improved urban gross marginswhich led to better gross profit and net profitcould serve as catalysts for driving the stock price upward. Investors may consider buying at around 1.05 Hong Kong dollars, setting a rebound target temporarily at the top of the major horizontal range at 1.18 Hong Kong dollars, and using the bottom of the major horizontal range at 1.00 Hong Kong dollars as short-term support. If the stock price falls below 1.00 Hong Kong dollars, it should be sold to cut losses. Given the current improvement in the fundamentals, low valuation, and the stock price being at the bottom of a horizontal range, BINHAI INV represents a stock with defensive qualities, catalysts, and room for rebound. Additionally, the company's earlier commitment to increase dividends by 10% annually from 2025 to 2027 means that investors looking for medium-term accumulation opportunities should not miss out. This article is reproduced from Hong Kong 01, author: Peng Weixin; GMTEight editor: Chen Wenfang.