Guozheng International: BINHAI INV has significantly reduced costs, attractive dividend yield, rating buy, target price HKD 1.36

According to the Zhitong Finance APP, Guozheng International released a research report stating that the company's dividend yield is quite attractive, giving Binhai Investment (02886) a 2025 P/E of 7.9x, corresponding to a target price of HKD 1.36, maintaining a "Buy" rating. The company has continuously reduced costs and increased efficiency this year, significantly lowering financial expenses, and the gross margin has recovered well year-on-year. However, given that industry demand needs to improve, the company's earnings forecast has been slightly downgraded. It is expected that the company's revenues for 2025E/2026E/2027E will be HKD 6.146 billion / 6.453 billion / 6.827 billion, year-on-year +0.8% / +5.0% / +5.8%; net profit attributable to the parent company will be HKD 232 million / 237 million / 242 million, year-on-year +16.5% / +2.1% / +1.9%. Event: The company announced its mid-year results for 2025. In the first half of the year, it achieved revenue of HKD 2.931 billion, down 17% year-on-year; gross profit of HKD 310 million, down 10% year-on-year; and net profit attributable to the parent company of HKD 173 million, up 3% year-on-year. The company's revenue and gross profit were mainly affected by the warm winter in Q1, which led to a decrease in gas volume and weak connections. Starting from Q2, gas volume has somewhat recovered, financial costs have significantly decreased, and value-added services are expected to grow well, providing growth momentum for this year's profits. In addition, the company's dividend policy ensures an absolute value of dividends, with this year's dividend yield expected to exceed 7%, which is quite attractive. The bank expects the company's EPS for 2025E/2026E/2027E to be HKD 0.17 / 0.18 / 0.18. Guozheng International's main points are as follows: Gas volume decreased year-on-year, while gross margin increased significantly year-on-year In the first half of the year, the company achieved total gas sales volume of 1.14 billion cubic meters (yoy -14%), of which pipeline gas sales were 830 million cubic meters (yoy -13%) and pipeline transmission gas was 310 million cubic meters (yoy -18%). This was mainly due to changes in market demand caused by the warm winter and some customers undergoing maintenance this year. In Q2, pipeline gas sales volume increased by +17% year-on-year, showing a strong recovery. The company guides that the total gas sales volume for the year will be approximately 2.568 billion cubic meters, up +2% year-on-year; pipeline gas sales volume will be approximately 1.868 billion cubic meters, up +9% year-on-year. The gross margin increased significantly year-on-year, with a comprehensive gross margin of HKD 0.44 per cubic meter in the first half of the year, up HKD 0.07 per cubic meter year-on-year, of which the average gross margin for urban gas was HKD 0.50 per cubic meter, up HKD 0.07 per cubic meter year-on-year. This is mainly due to the company's active exploration of upstream channel resources, continuous decline in gas procurement costs, and the ongoing promotion of residential gas pricing. The company guides that the urban gross margin for the year will be approximately HKD 0.52 per cubic meter, up HKD 0.04 per cubic meter year-on-year. Impact of connection business reduced, value-added business expected to grow well In the first half of the year, the company added 28,600 new connection households, mainly affected by the downturn in the real estate market. However, from the current structure of the company, the proportion of the connection business is decreasing year by year, and the impact of the connection business is diminishing. The value-added services business achieved revenue of HKD 37.67 million in the first half of the year, up 6.9% year-on-year; and gross profit of HKD 25.39 million, up 6.9% year-on-year. In the first half of the year, the company incorporated value-added services into its main business, demonstrating the company's optimism and emphasis on value-added services. Financing management has achieved significant results, providing long-term dividend returns to shareholders In the first half of the year, the company's financing cost was HKD 45.49 million, a significant decrease of 39% year-on-year. This was mainly due to the company's proactive repayment of high-interest debt and reasonable adjustment of its debt structure. The company is committed to returning value to shareholders and plans to increase its dividend by no less than 10% each year over the next three years, based on a dividend per share (DPS) of HKD 0.076 for the years 2025-2027. The company's dividend guidance is based on DPS, which helps ensure the absolute value of dividends paid to shareholders each year. Assuming a dividend of HKD 0.0836 per share this year, the current dividend yield could reach 7.4%, which is expected to be attractive to investors. Risk Warning: Rapid increase in natural gas costs, demand below expectations, and economic growth below expectations