Investment Rating - The report maintains a "Buy" rating for the company, with a target PE of 12x for 2025 and a dividend yield of 4.5% [106] Core Views - The company's profitability has gradually recovered in recent years, with the main gas sales business accounting for 71% of profits in the first half of 2024 [7] - The global natural gas market is rebalancing after the supply shocks of 2022-2023, but geopolitical conflicts and extreme weather continue to cause price volatility [9] - China's natural gas import dependency has increased to 42% in 2023, with LNG accounting for 61% of imports, making international gas prices more influential on domestic pricing [12] - The company is gradually building its own natural gas resource pool, which is expected to optimize its gas source structure and reduce procurement costs [36] - The company's dividend payout ratio has steadily increased from 18% in 2011 to 50% in 2023, with further room for growth as capital expenditures shrink and operating cash flow improves [45] Financial Performance - The company's operating income is expected to grow from HKD 101.3 billion in 2023 to HKD 112.8 billion in 2026, with a CAGR of 3.6% [1] - Net profit attributable to shareholders is projected to increase from HKD 5.2 billion in 2023 to HKD 6.4 billion in 2026, with a CAGR of 6.8% [1] - Gross margin is forecast to rise from 18.2% in 2023 to 19.2% in 2026, while ROE remains stable around 11% [1] - EPS is expected to grow from HKD 2.30 in 2023 to HKD 2.81 in 2026, with a forward PE ratio declining from 13.4x to 11.0x [1] Industry Analysis - Natural gas accounted for 8.5% of China's primary energy consumption in 2023, significantly lower than the global average of 23%, indicating substantial growth potential [22] - China's natural gas consumption is expected to reach 600 billion cubic meters by 2030, with a CAGR of 6.2% from 2023 [52] - The global LNG trade volume is projected to increase from 400 billion cubic meters in 2023 to 500 billion cubic meters by 2025 [8] - China's natural gas consumption structure is shifting, with industrial and residential consumption accounting for 40% and 30% respectively in 2023 [23] Company Strategy - The company is focusing on distributed photovoltaic, distributed energy, and transportation charging businesses, with comprehensive energy service revenue reaching HKD 1.64 billion in 2023, up 73% YoY [78] - The company is actively participating in urban village renovation projects and "pingji liangyong" infrastructure construction, which could boost its penetration rate in existing projects [28] - The company is optimizing its gas source structure through its own LNG receiving station, which is expected to reduce procurement costs and improve flexibility [36] - The company is expanding its integrated services business, with revenue from this segment growing 125% YoY to HKD 2.7 billion in 2023 [69]

Investment Rating - Buy (First Coverage) [1] Core Views - The company is the largest city gas operator in China, with stable cash flow matching capital expenditures and steadily increasing dividends [1] - The gas sales business benefits from high-quality projects and improved profitability due to market-oriented reforms [1] - The company is rapidly expanding its comprehensive service and comprehensive energy businesses, creating new growth points [1] - The company's city gas projects are of high quality, with price adjustments driving profit recovery, and the dual-comprehensive business growing faster than the industry [1] Business Overview City Gas Operations - The company is the largest city gas operator in China, with 276 city gas projects across 25 provinces as of 2024H1 [1] - Retail gas sales reached 387.80 billion cubic meters in 2023, accounting for 10% of national consumption [1] - The company's retail gas volume grew at a CAGR of 9.8% from 2018 to 2023, with a 5.3% YoY increase in 2024H1 [1] - The company's gas sales gross margin improved to 0.54 yuan/cubic meter in 2024H1, up 0.04 yuan/cubic meter YoY [1] Comprehensive Services - The company has 55.808 million urban residential users as of 2023, with 72.9% located in tier 1-3 cities [1] - Comprehensive service segment profit grew 18.99% YoY to 1.37 billion HKD in 2023, and further increased 22.12% YoY to 760 million HKD in 2024H1 [1] - The company's market share in kitchen appliances and insurance businesses reached 8.6% and 23.0% respectively in 2023 [1] Comprehensive Energy Business - The company focuses on distributed photovoltaic, distributed energy, and transportation energy sectors [1] - Energy sales volume increased 84.9% YoY to 2.94 billion kWh in 2023, with a gross profit of 270 million HKD, up 125% YoY [1] - In 2024H1, energy sales volume grew 54.6% YoY to 1.49 billion kWh, with a gross profit of 160 million HKD, up 84.3% YoY [1] Financial Performance - The company's operating revenue is expected to reach 98.882 billion HKD in 2024, with a YoY decrease of 2.83% [1] - Net profit attributable to shareholders is forecasted to be 5.722 billion HKD in 2024, with a YoY increase of 9.5% [1] - EPS is expected to be 2.47 HKD in 2024, with a P/E ratio of 11.5x [1] Valuation and Peer Comparison - The company's net profit is expected to grow at a CAGR of 9.1% from 2023 to 2026, faster than its peers [87] - The company's P/E ratio is 12.6x for 2023, 11.5x for 2024, 10.5x for 2025, and 9.7x for 2026, lower than the industry average [87]

Investment Rating and Target Price - The report initiates coverage on Huarong Gas with a "Buy" rating and a target price of HKD 37.05, based on a 15x PE multiple for 2024 [2] - The target price is derived from a combination of relative and absolute valuation methods, including PE, PB, and DDM models [11][14][16] Core Investment Thesis - Huarong Gas is expected to see steady profit growth driven by optimized business structure, improved operating cash flow, and reduced capital expenditures [1][7] - The company's free cash flow is improving, and its dividend per share (DPS) is entering an upward trajectory, enhancing its dividend value [1][2][7] - Key catalysts include margin improvement, dividend increases, and declining market interest rates [2][7] Business Segments and Growth Drivers Retail Gas Sales - Retail gas sales volume is expected to grow steadily, supported by policies like "coal-to-gas" and "bottle-to-pipeline" conversions [2][7][36] - The company's gas margin is expected to recover due to price adjustments and cost reductions, with a projected margin of RMB 0.53/0.55/0.56 per cubic meter for 2024-2026 [8][9] - Huarong Gas benefits from a higher proportion of residential gas sales, which allows it to capture more price adjustment benefits [7][42] Connection Business - Despite a slowdown in new connections due to the real estate downturn, the company still has room for growth, with an estimated 298/268/241 thousand new residential connections for 2024-2026 [8][54] - The company's contract liabilities remain high, providing a buffer for future connection business [7][55] Comprehensive Services and Energy Business - The comprehensive services business, including gas appliances and insurance, is expected to grow at a CAGR of 24.0%/22.0%/20.0% from 2024-2026 [8][58] - The comprehensive energy business, including distributed energy and EV charging, is projected to grow rapidly, with a target revenue of HKD 5 billion by 2025 [60][61] Financial Projections - Revenue is expected to grow at a CAGR of 5.0%/4.9%/3.9% from 2024-2026, reaching HKD 106.4/111.6/116.0 billion [9][10] - Net profit is projected to grow at a CAGR of 9.5%/11.3%/8.9% over the same period, with EPS of HKD 2.47/2.75/3.00 [9][10] Valuation - Relative valuation using PE and PB multiples suggests a fair value of HKD 37.05, based on a 15x PE and 2.0x PB for 2024 [11][12][13] - The DDM model estimates an intrinsic value of HKD 42.95 per share, based on a two-stage growth model and a cost of equity of 6.6% [14][15][16] Industry and Market Position - Huarong Gas is one of the largest city gas operators in China, with a strong presence in economically developed regions like the Yangtze River Delta and the Greater Bay Area [17][54] - The company benefits from its stable gas supply, with 87.7% of its gas sourced from pipelines, and long-term contracts with major suppliers like CNPC and Sinopec [42][43] Operational Efficiency and Cash Flow - The company has improved its working capital management, with positive cash flow contributions from prepayments and receivables in 2023 [7][51] - The gap between accounts receivable turnover days and prepayment turnover days has narrowed, indicating better cash flow efficiency [51][52]

Investment Rating - The report maintains an "OUTPERFORM" rating for China Resources Gas with a target price of HK$37.94, up from the previous target [3][10]. Core Insights - The company has experienced steady growth in gas sales driven by residential and commercial users, with total retail gas sales volume increasing by 5.3% year-on-year to 20.9 billion cubic meters in the first half of 2024 [8][9]. - Revenue for the first half of 2024 reached HK$20.08 billion, a 7.7% increase from the previous year, while operating profit rose by 18.3% to HK$5.56 billion [7][9]. - The integrated energy business has shown comprehensive growth, enhancing revenue and profitability through diversification into kitchen appliances, insurance, and home products [9][10]. Financial Summary - The company reported a net profit of HK$3.46 billion for the first half of 2024, a decrease of 2.5% year-on-year, with gross margin at 18.6% and operating profit margin at 10.7% [7][8]. - For FY24-26, the main operating revenue is adjusted to HK$102.65 billion, HK$108.36 billion, and HK$114.39 billion, with corresponding net profits of HK$5.43 billion, HK$5.70 billion, and HK$5.98 billion [10]

Investment Rating - The report maintains a "Buy" rating for China Resources Gas (01193) [3][4] Core Views - The company announced a share repurchase plan, demonstrating confidence in its long-term development [3][4] - Plans to repurchase at least 45,797,384 shares (1.98% of total issued shares) and potentially more [3][4] - The repurchase will be funded by internal cash resources, with minimal financial pressure [4] - Stable and increasing dividends highlight long-term investment value [4] - Dividend per share grew from HKD 0.45 in 2016 to HKD 1.1569 in 2023 [4] - Interim dividend for 2024 increased to HKD 0.25 per share, a record high [4] - Residential gas price linkage mechanism continues to benefit the company [4] - Price adjustments in Hefei (a joint venture project) and nationwide implementation expected to enhance operational stability [4] Financial Performance and Projections - Revenue and profit growth projections [5][6] - 2024E revenue: HKD 107,041 million (+5.7% YoY) [5] - 2024E net profit attributable to shareholders: HKD 6,248 million (+19.6% YoY) [5] - 2026E net profit attributable to shareholders: HKD 7,809 million (+14.64% YoY) [5] - Key financial metrics [5][6] - 2024E EPS: HKD 2.75 [5] - 2024E ROE: 15.5% [5] - 2024E PE ratio: 11.4x [5] - Strong cash position and low leverage [4] - Cash and bank deposits: HKD 11.57 billion as of mid-2024 [4] - Interest-bearing debt ratio: 30.3% [4] - Overall financing cost: 2.4%, among the best in the industry [4] Industry and Market Context - The company operates in the utilities sector, with a focus on gas distribution [1] - Market data as of September 26, 2024 [1] - Closing price: HKD 31.30 - 52-week range: HKD 19.50 - HKD 31.95 - Market capitalization: HKD 72.429 billion - Outstanding H-shares: 2,314.01 million

Gas Sales and Market Performance - CR Gas achieved a total gas sales volume of approximately 20.901 billion cubic meters in the first half of 2024[9] - Total natural gas sales volume increased by 5.3% year-on-year to 20.9 billion cubic meters, with revenue rising 7.7% to HK$52.08 billion[18][19] - Industrial gas sales reached 9.66 billion cubic meters, up 3.7%, accounting for 46.2% of total gas sales[20][22] - Commercial gas sales grew 8.1% to 5.01 billion cubic meters, representing 24.0% of total gas sales[20][22] - Residential gas sales increased 7.0% to 5.76 billion cubic meters, making up 27.6% of total gas sales[20][22] - The Group developed 25,000 new industrial and commercial users and 1.031 million new residential users, including 882,000 new house connections[21][24] - Gas penetration rate in China increased from 58.4% to 59.6% year-on-year[21][24] - Annual gas contract coverage rate increased to 99.7%, with 1.75 billion cubic meters procured, up 30% year-on-year[20][22] - Supplemental unconventional gas resources exceeded 200 million cubic meters, improving gas supply security and cost optimization[20][22] Business Expansion and Operations - CR Gas operates 276 city gas projects across 25 provinces in China, including 15 provincial capitals and 76 prefecture-level cities[13] - The company continues to expand through organic growth, leveraging favorable industry fundamentals and execution competency[13] - The Group signed 2 new projects and registered 3 projects, bringing total registered city gas projects to 276 across 25 provinces[25][27] - The Group's grid-based customer service model now covers 32.61 million users, with 19.86 million users on enterprise WeChat[26] - The Group's distributed photovoltaic projects reached a total of 208, with energy sales volume of 1.49 billion kWh, a 54.6% year-on-year increase[30][32] - The Group's distributed energy projects totaled 211, with 28 new projects signed and 31 newly put into operation in H1 2024[30][32] - The Group's transport charging business expanded to 263 charging stations, an increase of 86, with electricity sales of 180 million kWh, up 20% year-on-year[30][33] - The Group's comprehensive energy consumption per RMB10,000 operating revenue decreased by 7.8%, and per RMB10,000 value added decreased by 10.9% in H1 2024[35] - The Group's Gas Butler service model now covers 32.61 million users, with 19.86 million WeChat Business users[28] Financial Performance - The Group achieved a revenue of HK$52.08 billion in the first half of 2024, representing a year-on-year increase of 7.7%[36][38] - The overall gross profit margin of the Group was 18.6%, an increase of 0.4 percentage points compared to the same period last year[36][38] - The proportion of revenue from gas connection business decreased from 8.8% in 2023 to 5.8% in the first half of 2024[36][38] - The Group's operating cash flow in the first half of 2024 was HK$4.25 billion, maintaining high-quality management[36][39] - Revenue increased by 7.7% to HK$52,075.59 million in 2024 compared to HK$48,369.60 million in 2023[97] - Gross profit rose by 9.7% to HK$9,671.18 million in 2024 from HK$8,818.87 million in 2023[97] - Profit attributable to the owners of the company decreased by 2.5% to HK$3,456.74 million in 2024 from HK$3,545.26 million in 2023[97] - Net cash from operating activities (after tax payments) declined by 10.6% to HK$4,252.98 million in 2024 from HK$4,756.32 million in 2023[97] - Basic EPS decreased by 2.6% to 152 HK cents in 2024 from 156 HK cents in 2023[97] - Total assets grew by 1.3% to HK$139,687.37 million in 2024 from HK$137,871.09 million in 2023[99] - Bank balances and cash increased by 15.9% to HK$11,568.36 million in 2024 from HK$9,978.47 million in 2023[99] - Total borrowings rose by 6.2% to HK$28,161.15 million in 2024 from HK$26,528.72 million in 2023[99] - Gross profit margin improved to 18.6% in 2024 from 18.2% in 2023[100] - Net profit margin (attributable to owners of the company) decreased to 6.6% in 2024 from 7.3% in 2023[100] - Revenue for the six months ended 30 June 2024 increased to HK$52,075.59 million, up 7.66% compared to HK$48,369.60 million in the same period of 2023[111] - Gross profit rose to HK$9,671.18 million in 2024, a 9.67% increase from HK$8,818.87 million in 2023[111] - Profit before taxation grew by 2.22% to HK$5,716.43 million in 2024, compared to HK$5,592.07 million in 2023[111] - Profit for the period slightly decreased to HK$4,493.42 million in 2024, down 1.41% from HK$4,557.55 million in 2023[111] - Total comprehensive income for the period increased by 20.18% to HK$4,001.83 million in 2024, compared to HK$3,329.99 million in 2023[111] - Earnings per share (Basic) for 2024 stood at HK$1.52, a slight decrease from HK$1.56 in 2023[116] - The company's share of results from joint ventures increased by 44.73% to HK$286.26 million in 2024, compared to HK$197.78 million in 2023[111] - Exchange differences arising on translation improved significantly, with a loss of HK$492.67 million in 2024 compared to a loss of HK$1,226.47 million in 2023[111] - Net movement in fair value reserve (non-recycling) turned positive at HK$1.08 million in 2024, compared to a negative HK$1.09 million in 2023[111] - Profit attributable to owners of the company decreased by 2.50% to HK$3,456.74 million in 2024, compared to HK$3,545.26 million in 2023[111] - Non-current assets increased to HK$103,213,990,000 from HK$102,417,286,000, reflecting growth in property, plant, and equipment[118] - Current liabilities rose to HK$57,056,620,000 from HK$51,108,934,000, driven by higher bank and other borrowings[118] - Total equity grew to HK$64,904,354,000 from HK$63,383,682,000, with equity attributable to owners increasing to HK$41,616,168,000[120] - Bank and other borrowings under non-current liabilities decreased to HK$11,592,572,000 from HK$17,279,384,000[120] - Net current liabilities worsened to HK$(20,583,243,000) from HK$(15,655,135,000)[118] - Total comprehensive income for the period was HK$3,127,803,000, with dividends paid amounting to HK$2,283,866,000[123] - Reserves increased to HK$41,384,767,000 from HK$40,540,830,000, reflecting retained profits and other adjustments[120] - Investment properties decreased slightly to HK$888,658,000 from HK$913,030,000[118] - Loans to a joint venture stood at HK$1,896,389,000, showing a minor decline from HK$1,909,907,000[118] - Deposits for acquisition of assets reduced to HK$300,724,000 from HK$413,073,000[118] - Exchange differences arising on translation resulted in a loss of HK$1,025,978,000[127] - Total comprehensive income for the period was HK$2,518,688,000[127] - Dividends paid amounted to HK$2,126,341,000 for the six months ended 30 June 2024, compared to HK$2,041,394,000 in the same period last year[128][129] - Net cash from operating activities was HK$4,252,981,000 for the six months ended 30 June 2024, down from HK$4,756,323,000 in the same period last year[133] - Proceeds from redemption of other deposits were HK$20,732,105,000, up from HK$19,670,681,000 in the same period last year[133] - Payments for acquisition of property, plant and equipment were HK$2,265,949,000, compared to HK$2,105,301,000 in the same period last year[133] - Net cash used in investing activities was HK$3,861,284,000, up from HK$3,357,131,000 in the same period last year[133] - Proceeds from new bank and other loans were HK$21,806,890,000, compared to HK$18,969,893,000 in the same period last year[133] - Repayments of bank and other loans were HK$16,352,769,000, significantly higher than HK$2,647,796,000 in the same period last year[133] - Net cash from financing activities was HK$835,665,000, down from HK$10,964,476,000 in the same period last year[133] - Net increase in cash and cash equivalents for 2024 was HK$1,227,362,000, compared to HK$12,363,668,000 in 2023[135] - Cash and cash equivalents at the end of the period for 2024 were HK$11,127,977,000, down from HK$18,600,688,000 in 2023[136] - The Group's current liabilities exceeded its current assets by approximately HK$20,583,243,000 as of 30 June 2024[142] - The Group has capital commitments of approximately HK$127,738,000 as of 30 June 2024[142] - Total bank and other borrowings, and medium-term notes amounted to approximately HK$28,161,145,000 as of 30 June 2024, with HK$16,020,738,000 classified as current liabilities[142] - Unutilised banking facilities stood at HK$37,579,135,000 as of 30 June 2024[142] - The Group's bank balances and cash in the consolidated statement of financial position were HK$11,568,360,000 for 2024, down from HK$18,600,688,000 in 2023[136] - The effect of foreign exchange rate changes resulted in a net decrease of HK$77,853,000 in 2024, compared to a net decrease of HK$200,459,000 in 2023[135] - The Group's cash and cash equivalents at the beginning of the period were HK$9,978,468,000 for 2024, up from HK$6,437,479,000 in 2023[135] - Deposits with banks with more than three months to maturity when placed amounted to HK$440,383,000 for 2024, with no comparable figure for 2023[136] - Revenue from external sales reached HKD 52.08 billion, with the largest contribution from gas fuel and related products at HKD 45.92 billion[149] - Segment results showed a profit before taxation of HKD 5.72 billion, with the gas fuel and related products segment contributing HKD 4.65 billion[149] - Gas connection segment revenue was HKD 3.02 billion, contributing HKD 1.12 billion to segment results[149] - Comprehensive services segment generated HKD 1.77 billion in revenue, with segment results of HKD 761.12 million[149] - Design and construction services segment revenue was HKD 335.50 million, contributing HKD 33.96 million to segment results[149] - Gas stations segment revenue was HKD 1.04 billion, with segment results of HKD 93.89 million[149] - Share of results from joint ventures and associates amounted to HKD 286.26 million and HKD 158.90 million respectively[149] - Unallocated income and expenses were HKD 567.93 million and HKD 1.43 billion respectively[149] - Finance costs, excluding interest on lease liabilities, totaled HKD 539.54 million[149] - The Group's operating segments include gas fuel sales, gas connection, comprehensive services, design and construction services, and gas stations[145] - Total revenue for the six months ended 30 June 2023 was HK$48,369,601 thousand, with external sales contributing HK$41,236,701 thousand from gas fuel and related products[151] - Segment results for the period were HK$5,879,439 thousand, with the largest contribution from gas fuel and related products at HK$3,509,041 thousand[151] - Share of results from joint ventures and associates amounted to HK$197,782 thousand and HK$230,292 thousand, respectively[151] - Unallocated income and expenses were HK$1,143,112 thousand and HK$(1,433,073) thousand, respectively, impacting the overall profit before taxation of HK$5,592,066 thousand[151] - Segment assets as of 30 June 2024 totaled HK$139,687,367 thousand, with the largest portion attributed to the sale and distribution of gas fuel and related products at HK$84,716,768 thousand[155] - Segment liabilities as of 30 June 2024 were HK$74,783,013 thousand, with the sale and distribution of gas fuel and related products accounting for HK$18,528,181 thousand[155] - Current tax for the six months ended 30 June 2024 was HK$1,357,984 thousand, primarily from PRC Enterprise Income Tax[159] - Deferred taxation for the same period resulted in a credit of HK$(134,977) thousand, reducing the total tax expense to HK$1,223,007 thousand[159] - No provision for Hong Kong Profits Tax was made as the company and its subsidiaries in Hong Kong had no assessable profits for the period[160] - Net profit attributable to owners of the company for the six months ended 30 June 2024 was HK$3,456,742,000, compared to HK$3,545,256,000 in the same period last year[166] - The company declared an interim dividend of 25 HK cents per share for the six months ended 30 June 2024, totaling HK$567,054,000, an increase from 15 HK cents per share (HK$340,232,000) in the same period last year[163][164] - Total depreciation and amortization expenses for the six months ended 30 June 2024 were HK$1,901,466,000, including HK$1,548,538,000 for property, plant and equipment, and HK$203,590,000 for right-of-use assets[162] - The company incurred HK$2,513,240,000 in construction in progress costs for the six months ended 30 June 2024, compared to HK$1,965,553,000 in the same period last year[171][174] - Additions to prepaid land lease payments and other right-of-use assets totaled HK$47,130,000 and HK$77,673,000 respectively for the six months ended 30 June 2024[172][175] - Interest expenses on bank and other borrowings increased to HK$522,932,000 for the six months ended 30 June 2024 from HK$399,895,000 in the same period last year[162] - The company provided unsecured loans to a joint venture at an interest rate of 5-year Loan Prime Rate floating downward 20% with a five-year term[173][176] - Trade receivables decreased to HK$11,192,821,000 as of June 30, 2024, from HK$11,435,927,000 on December 31, 2023, with an impairment of HK$446,444,000[178] - Amounts due from joint ventures increased significantly to HK$1,012,318,000 as of June 30, 2024, compared to HK$433,893,000 on December 31, 2023[178] - Amounts due from associates rose to HK$290,694,000 as of June 30, 2024, from HK$150,100,000 on December 31, 2023[178] - Trade payables decreased to HK$13,382,458,000 as of June 30, 2024, from HK$14,435,105,000 on December 31, 2023[183] - Receipts in advance dropped to HK$8,973,043,000 as of June 30, 2024, from HK$10,134,560,000 on December 31, 2023[183] - Other payables and accruals increased to HK$7,983,966,000 as of June 30, 2024, from HK$6,786,984,000 on December 31, 2023[183] - The ageing analysis of trade receivables shows that 0-90 days receivables decreased to HK$7,151,121,000 as of June 30, 2024, from HK$7,599,525,000 on December 31, 2023[181] - Over 365 days receivables increased to HK$2,314,724,000 as of June 30, 2024, from HK$2,141

Investment Rating - The report maintains a "Buy" rating for China Resources Gas (1193) with a target price of HKD 32.60, representing a potential upside of 16% from the current price of HKD 28.15 [1]. Core Insights - The company has significantly improved its gross margin, leading to a substantial increase in interim dividends. The gross margin rose to HKD 0.54 per cubic meter, up from HKD 0.50 per cubic meter in the same period last year [1]. - For the first half of 2024, the company reported a year-on-year increase of 21.2% in core net profit attributable to shareholders, amounting to HKD 34.6 billion, despite a 2.5% decline when excluding one-time gains from the previous year [1]. - The total revenue for the first half of 2024 reached HKD 52.08 billion, reflecting a year-on-year growth of 7.7% [1]. Summary by Sections Financial Performance - The company achieved a total revenue of HKD 52.08 billion in the first half of 2024, with contributions from gas sales, connection fees, and comprehensive services [1]. - The overall gross margin improved to 18.6%, marking the first increase since 2020 [1]. - The natural gas sales volume reached 209 billion cubic meters, a year-on-year increase of 5.3% [1]. Business Segments - The comprehensive services segment saw a revenue increase of 20.0% to HKD 17.6 billion, with segment profit rising by 22.1% to HKD 7.6 billion [1]. - The comprehensive energy business generated revenue of HKD 8.3 billion, a year-on-year growth of 38.0% [1]. Future Outlook - The company is expected to maintain a stable capital expenditure, which will support ongoing shareholder returns. Revenue projections for 2024 to 2026 are estimated at HKD 105.9 billion, HKD 111.8 billion, and HKD 119.0 billion, respectively [1]. - The net profit attributable to shareholders is projected to be approximately HKD 57 billion, HKD 62 billion, and HKD 71 billion for the years 2024 to 2026 [1].

Investment Rating - The report assigns an investment rating of "X-xx" to the company [3] Core Views - The company's gas distribution business performed well, with segment profit increasing by 31.3% YoY [1] - The company's free cash flow surged by 562.3% YoY to HKD 1.9 billion in the first half of 2024 [1] - The company's interim dividend per share increased by 66.7% to 25 HK cents [2] - The company's core gas sales business showed good growth, while the dual-comprehensive business grew rapidly [1] Business Performance Gas Sales - Retail gas sales volume reached 20.9 billion cubic meters, up 5.3% YoY [1] - Residential users: 5.76 billion cubic meters, up 7% YoY [1] - Industrial users: 9.66 billion cubic meters, up 3.7% YoY [1] - Commercial users: 5.01 billion cubic meters, up 8.1% YoY [1] - Vehicle users: 470 million cubic meters, down 8.4% YoY [1] - Gas sales gross margin improved to 0.54 yuan/cubic meter, up 0.04 yuan/cubic meter YoY [1] - Gas sales segment profit reached HKD 4.75 billion, up 31.3% YoY [1] Comprehensive Services - Comprehensive service revenue reached HKD 1.77 billion, up 20% YoY [2] - Segment profit reached HKD 760 million, up 22.1% YoY [2] - Market share of kitchen appliances and water heaters increased from 8.7% to 9.0% [2] - Insurance agency market share increased from 25.6% to 25.8% [2] - Average revenue per household for Anju business increased from 54.2 yuan to 55.1 yuan [2] Comprehensive Energy - Comprehensive energy revenue reached HKD 830 million, up 38% YoY [2] - Gross profit reached HKD 160 million, up 84.3% YoY [2] Connection Business - New residential connection users reached 1.031 million, down 23.1% YoY [2] - The connection business continues to be affected by the real estate market [2] Financial Performance - Revenue reached HKD 52.08 billion, up 7.7% YoY [1] - Net profit attributable to shareholders reached HKD 3.46 billion, down 2.5% YoY [1] - Excluding one-time gains, net profit attributable to shareholders increased by 21.2% YoY [1] - Free cash flow reached HKD 1.9 billion, up 562.3% YoY [1] - Interim dividend per share increased by 66.7% to 25 HK cents [2] Market Position - The company is a leading gas distributor in China with strong market position [2] - The company has developed a natural gas spot trading platform and gas source network [1] - Over 160 project companies and 190 suppliers have registered on the platform [1] - Transaction volume exceeded 45 million cubic meters with transaction amount of RMB 150 million in the first month [1] Shareholder Structure - China Resources Group holds 61.46% of shares [5] - Other shareholders hold 38.54% of shares [5] Historical Data - Historical gas sales volume and gross margin trends are shown in charts [7] - Historical new residential connection numbers and dividend payout ratios are shown in charts [8]

Investment Rating - The report maintains an "Outperform" rating for China Resources Gas (01193 HK) [1][12] Core Views - Stable performance growth driven by gas sales volume increase and margin recovery [1] - Rapid development of "two comprehensive" businesses partially offsetting the impact of reduced connection business [1] - Significant increase in interim dividend payout [12] Financial Performance Revenue and Profit - H1 2024 revenue reached HK$52 076 million (+7 7% YoY) [1] - Net profit attributable to shareholders was HK$3 457 million (-2 5% YoY) but increased 21 2% YoY excluding one-time gains from Chongqing Gas consolidation in 2023 [1] - Gas sales volume reached 20 9 billion cubic meters (+5 3% YoY) with gas sales margin of RMB 0 54/cubic meter (+RMB 0 04/cubic meter YoY) [1] Gas Sales Breakdown - Residential gas: 5 76 billion cubic meters (+7 0% YoY) accounting for 27 6% of total [1] - Industrial gas: 9 66 billion cubic meters (+3 7% YoY) accounting for 46 2% [1] - Commercial gas: 5 01 billion cubic meters (+8 1% YoY) accounting for 24 0% [1] - Vehicle gas: 0 47 billion cubic meters (-8 4% YoY) accounting for 2 2% [1] Pricing and Costs - Average gas sales price: RMB 3 48/cubic meter (-RMB 0 10/cubic meter YoY) [1] - Residential: RMB 2 67/cubic meter (+RMB 0 08/cubic meter YoY) [1] - Commercial/industrial: RMB 3 81/cubic meter (-RMB 0 18/cubic meter YoY) [1] - Vehicle: RMB 3 87/cubic meter (-RMB 0 17/cubic meter YoY) [1] - Average gas cost: RMB 2 94/cubic meter (-RMB 0 14/cubic meter YoY) [1] Business Segments Connection Business - Revenue decreased 29 1% YoY to HK$3 016 million accounting for 5 8% of total revenue [1] - Segment profit decreased 29 4% YoY to HK$1 124 million [1] Comprehensive Services - Revenue increased 20 0% YoY to HK$1 770 million [1] - Profit increased 22 1% YoY to HK$760 million [1] Comprehensive Energy - Revenue increased 38 0% YoY to HK$830 million [1] Financial Projections Revenue - 2024E: HK$106 726 million (+5% YoY) [3] - 2025E: HK$115 280 million (+8% YoY) [3] - 2026E: HK$122 481 million (+6% YoY) [3] Net Profit - 2024E: HK$5 641 million (+8% YoY) [3] - 2025E: HK$6 133 million (+9% YoY) [3] - 2026E: HK$6 629 million (+8% YoY) [3] Valuation Metrics - 2024E PE: 12X [12] - 2025E PE: 11X [12] - 2026E PE: 10X [12] Dividend Policy - Interim dividend: HK$0 25/share (+66 7% YoY) with payout ratio of 16 74% [12] - 2023 annual dividend: HK$1 16/share with payout ratio of 51 25% and yield of 4 5% [12] Industry Comparison - China Resources Gas shows higher growth potential compared to peers with 2024E-2026E EPS growth of 8%-9% [13] - The company maintains a relatively stable ROE of 12 9%-13 3% from 2024E-2026E [3]

Investment Rating - Buy (maintained) [4] Core Views - The company reported a 7 7% YoY increase in revenue to HKD 52 08 billion for the first half of 2024 while net profit attributable to shareholders decreased by 2 5% YoY to HKD 3 457 billion Excluding a one-time gain of HKD 694 million from the consolidation of Chongqing Gas the net profit increased by 21 2% YoY [4] - Retail natural gas sales volume reached 20 9 billion cubic meters up 5 3% YoY with residential industrial and commercial gas volumes increasing by 7 0% 3 7% and 8 1% respectively The company's gas sales gross margin improved by HKD 0 04 per cubic meter to HKD 0 54 per cubic meter [4] - The company's dual comprehensive businesses (comprehensive services and comprehensive energy) are growing rapidly with cumulative natural gas users reaching 58 836 million by 1H24 Distributed photovoltaic projects reached 208 with a total installed capacity of 273MW and distributed energy projects reached 3GW in installed capacity [4] - The company's capital expenditure decreased by 47 3% YoY to HKD 2 36 billion in 2023 leading to a significant increase in free cash flow to HKD 1 9 billion [4] Financial Performance - Revenue for 2024E is projected at HKD 107 041 billion with a YoY growth of 5 7% Net profit attributable to shareholders is expected to reach HKD 6 248 billion a 19 6% YoY increase [5] - EBITDA for 2024E is forecasted at HKD 14 592 billion up from HKD 12 7 billion in 2023 [6] - The company's PE ratio for 2024E is 9 5x with a PB ratio of 1 5x [5] Business Highlights - The company has expanded its resource channels with a 99 7% annual contract gas coverage rate and added 7 5 billion cubic meters of contracted gas volume in 2024 [4] - The company's gas source trading platform "Gas He Network" was launched in July 2024 enhancing its gas source bargaining and coordination capabilities [4] - The company's comprehensive energy business achieved a 54 6% YoY increase in energy sales volume to 1 49 billion kWh with a gross profit of HKD 160 million up 84 3% YoY [4] Market Position - The company's market capitalization stands at HKD 60 859 billion with a closing price of HKD 26 30 as of August 30 2024 [2] - The company's stock price has underperformed the HSCEI index by 21% over the past year [2]