In "Major Banks," China International Capital Corporation (CICC) expects gas profits in the second half of the year to be flat compared to the first half, raising the target price slightly to 7.77 yuan and reiterating the "Buy" rating

The research report from Bank of China International indicates that Hong Kong and China Gas (00003.HK) saw a year-on-year profit decline of 3% to HKD 2.964 billion in the first half of this year, which is 3% lower than the bank's forecast. The discrepancy mainly stems from profits in the renewable energy and green fuel businesses falling short of expectations. It is anticipated that the company's profits in the second half of 2025 will be on par with the first half, as improvements in these two businesses will be offset by higher cost provisions in the Hong Kong gas business. The bank also stated that although it has lowered its profit forecasts for 2025 to 2027 by 2% to 9%, it reaffirms its "Buy" rating.

For the second half of the year, Bank of China International expects profits from the gas renewable energy business to grow by 32% half-on-half due to seasonal factors and more provisions for disposal gains. The profitability of renewable fuel producer Eco Ceres is expected to improve significantly, as current sustainable aviation fuel (SAF) prices are around USD 2,380 per ton. However, these gains should be offset by lower profits from the Hong Kong utilities business, as costs in this sector are typically higher in the second half of the year.

The bank also mentioned that based on higher-than-expected dividends from associates and joint ventures in 2024, it has raised its free cash flow forecast by 3% to 4%. Consequently, the target price based on discounted cash flow (DCF) has been raised from HKD 7.26 to HKD 7.77, equivalent to a forecast price-to-earnings ratio of 24.4 times for 2025