HSBC raises the target price for CHINA GAS HOLD to 7.2 yuan, maintaining a hold rating

HSBC's research report indicates that CHINA GAS HOLD (00384.HK) has an annual net profit increase of 2% year-on-year. Excluding one-time items, core profit is expected to decline by 14% year-on-year, lower than market and the bank's expectations, mainly due to a decrease in profits and connection volumes from connection services, flat retail natural gas sales, and contributions from subsidiaries and joint ventures falling short of expectations, offsetting the expansion of dollar margins and value-added services.

However, the dividend per share remains at HKD 0.5, supported by reduced capital expenditures and cash contributions from subsidiaries and joint ventures. The bank has lowered its earnings forecast but, based on new assumptions regarding the cost of equity and capital expenditures, raised the target price from HKD 6.7 to HKD 7.2, maintaining a "Hold" rating, and believes that the current yield of 6.8% is attractive, which is expected to limit downside risk for the stock price