中国燃气2026财年核心盈利基本符合预期、股息略不及预期，最坏情况或已过去

China Utilities FY26 core earnings in line with slightdividend miss; worst likely behind Gary Zhou, CFA Research Analyst+852-2203-5889 Aftermarket close on June26, China Gas Holdings (CGH)reportedFY26 (March year-end)coreearnings of HKs2.86bn,down 16%YoY,broadly in line with ourestimateof HKs2.8bnand slightlyaboverecentinvestorexpectationsof HK$2.5-2.6bn.Full-yearDPS of HK$0.35came in slightlybelow our estimate (HK0.42)asthe company reduced its payout ratio to 70%.That said, management guidedcurrentdividendlevelislikelythetroughandexpectsimprovementincomingyears,supported by earnings recovery.Thestock currently offers a FY26 dividend yield of6.2%, broadly in line with gas peers.Aswehighlighted earlier,independent shareholdersapprovedthecompany's management share award schemeon June24.Thevesting criteria require either15%YoYgrowthincoreearningsoradoublingofcoreearningsoverfiveyearsrelative to FY26,providing stronger alignment between management incentivesand earnings growth. ResultsdetailsGasvolume.Retail city-gasvolume dropped by0.2%YoYinFY26.Byuser category,residential/industrial gas volumes increased by 0.9%/1%YoYwhile commercial/vehicle gas volumes decreased by 4.5%/20.4% YoYrespectively. Gas dollar margin.Dollar margin increased from Rmb0.54/cubic meter(c.m.) in FY25 to Rmb0.55/c.m. in FY26 (up Rmb0.015/c.m.YoY, slightlyaheadofguidanceof+Rmb0.01/c.mYoY). Newgasconnections.Newresidentialconnectionsfell19%YoYto1.1mnhouseholds,withinmanagement guidance. Free cash flows.The company recorded decent free cash flow of HK$4.84bn in FY26 (vs.HK$4.66bn in FY25).Operating cash flow was HK$7.02bn in FY26, up 9% YoY. Segmentprofits.Segmentprofitfromretailgasbusinessincreasedby3%YoY,whilethatfromgasconnectionsfell by11%YoY.Value-added Service(VAS)business sawa7%YoYsegmentprofitdecrease inFY26.Asaresult,total segmentprofitdeclined by2%YoYtoHKs6.5bn. Otherincome droppedby48%YoYto HKs0.5bn.Finance cost dropped by6.6%YoYinFY26toHK$1.7bn.As a result,netprofitdropped by16.4%YoYin FY26 to HK$2.7bn. IMPORTANTRESEARCHDISCLOSURESANDANALYSTCERTIFICATIONSLOCATEDINAPPENDIX1.DeutscheBankdoesand seekstodobusiness withcompanies covered in its research reports.Thus,investors shouldbeawarethatthefirmmayhave a conflict of interest thatcould affecttheobjectivity of this report. Investors should considerthis report as onlya singlefactor in making their investment decision. UtilitiesChina Gas Holdings full-year DPS droppedto HK$0.35 per share in FY26 from HK$0.5 inFY25. City-gas volume.The company expects a 0-2% YoY city-gas volume growth inFY27 (Apr2026-Mar2027).Gasvolume inApr-May2026saw0.7-0.8%YoYdeclines mainly due to weak industrial demand.Gasdollarmargin.Management expectsFY27dollarmarginto remain broadly flat YoY.Dollar margin fell by RMB0.03/c.m in Apr-May 2026 amidhigher gas costs, but management expects a recovery in the comingmonths as tariff pass-throughs take effect.Gas connection.The companytargetsto add0.9-1.Omnnew residential gas connections in FY27 (vs. 1.0-1.2mn in FY26).Value-added Services.The company expects thegross profitor operating profit of its value-added services to grow by 10%+ in FY27. Biomass.Management guided that the company has secured biomassprojects with contracted capacity of 9.66mn steamtonnesperyear,biomass is expectedto be akey earnings growthdriveroverthenextfewyears. ManagementguidedFY27capexofHK$4.0bn (vs.HK$4.4bn inFY26),withHKs2.0-2.5bn allocated to the city-gas business and HKs1.5bn to newbusinesses,including integrated energy(HKs1.Obn)and biomass(HK$0.5bn). ValuationWe slightly cut FY27-28EEPS forecasts after incorporating latest management guidance.As a result, our DCF-based target price is revised from HKs10.0 to HKs9.0.WederiveourtargetpriceusingaDCFmethodology,assuminga7%WACC,9% cost of equity,3% after-tax cost of debt, and a terminal growth rate of 0.5%. We believe the key downside risks are: (1) weaker-than-expected national gasdemand; (2)unfavorable gas procurement costs, which couldweigh on city-gassales volumes and unit margins; and (3) slower-than-expected progress in newbusiness development, which couldhinderthe company'starget of doubling coreearningsbetweenFY26andFY31. UtilitiesChina Gas Holdings UtilitiesChina Gas Holdings Figure4:China's city-gas distributors-valuation comparison UtilitiesChina Gas Holdings Reuters: 0384.HKBloomberg: 384 HK China Gas Holdings Ltd. invests in, operates and manages natural gas distribution businesses.The Company distributesand sells natural gas to residential, commercial andindustrial users, and bottles and sells compressed naturalgas. CashFlow (HKDm)Cash flow from operations Margin Trends14 Balance Sheet (HKDm) Key Company Metrics GaryZhou,CFA+852 22035889gary.zhou@db.com UtilitiesChina Gas Holdings Appendix 1 *Other information available upon request entlypublishedcrt.important riskandconflictdisclosurescanalsobefoundathttps://research.db.ctorvisitourglobaldisclosureare stronglyencouragedtoreview this