Daiwa Lowers CHINA RES GAS Target Price to HKD16 with Sell Rating; Potential Internal Issues at Play
CHINA RES GAS Financial Performance
- Net Profit Decline: CHINA RES GAS reported a significant 30% year-on-year decline in its net profit for the first half of 2025, amounting to HKD 2.403 billion.
- Dividend Increase: Despite the profit slump, the company raised its dividend by 20%, now offering HKD 0.30 per share.
Market Reaction and Analyst Insights
- Target Price Adjustment: Daiwa has lowered its target price for CHINA RES GAS from HKD 19.9 to HKD 16, maintaining a Sell rating on the stock.
- Short Selling Activity: The stock experienced short selling worth $1.56 million, with a short selling ratio of 3.260%, indicating a bearish sentiment among investors.
Management and Investor Sentiment
- Underperformance Compared to Peers: As the last city gas company to report its results, CHINA RES GAS has underperformed its competitors in nearly all metrics, raising concerns about potential management issues.
- Increased Risk Premium: The underperformance may lead investors to seek a higher risk premium, reflecting a cautious outlook on the company's future performance.
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Offshore Wind Turbine Procurement: China's offshore wind turbine procurement capacity reached 8.42 gigawatts last year, with MINGYANG SMART ENERGY leading at 2.1 gigawatts and GOLDWIND at 1.2 gigawatts, driven by positive market sentiment.
Stock Recommendations: JPMorgan recommends focusing on companies with strong earnings growth, such as ORIENT WIRES & CABLES, DAQO New Energy, and GCL TECH, while the A-share photovoltaic industry index has outperformed the market.
Energy Storage Growth: China's installed capacity of energy storage systems surged by 73% year-on-year, with SUNGROW POWER expected to benefit from policy reforms and increased demand in high-end markets.
Cautious Outlook on Gas Utilities: JPMorgan maintains a cautious view on China's gas utilities sector due to weak growth and profit margins, with KUNLUN ENERGY identified as a top pick, while CHINA RES GAS faces challenges with slow share buybacks and weak operating trends.
Daiwa's Ratings and Target Prices for Gas Stocks (Table)
Stock Performance: HK & China Gas remains stable with no change in share price, while China Res Gas has seen a slight decline of 0.120 (-0.560%).
Short Selling Data: Significant short selling activity is noted across the companies, with HK & China Gas at $29.80M (28.257% ratio) and China Res Gas at $42.00M (35.576% ratio).
Analyst Ratings: HK & China Gas has been upgraded from "Hold" to "Outperform" with a target price increase from 7.1 to 7.7, while China Gas Hold maintains an "Outperform" rating with a target of 8.3.
Market Outlook: Daiwa has upgraded its view on the CN natural gas sector to "Neutral," expecting improved fundamentals in 2026.
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Impact on Share Prices: JPMorgan believes the delay in ENN Energy's privatization scheme may have a slight negative effect on its share price, while its H-shares are viewed as offering better risk-return compared to A-shares.
China Gas Hold Performance: China Gas Hold reported a 24.2% decline in interim net profit for 1HFY2026, with weak operational indicators, but is expected to see a gradual recovery in gas sales over the next few months.
Market Opportunities: JPMorgan suggests that investors consider market entry opportunities in KUNLUN Energy, which is projected to achieve over 5% sales growth in 2H25, alongside improvements in gas sales for other companies like China Resources Gas.
BofAS Raises Target Price for CHINA RES GAS (01193.HK) to $22.5 Following Improved October Natural Gas Sales
Share Buybacks: CHINA RES GAS initiated share buybacks on November 20 and 21, repurchasing a total of 1.77 million shares, which is approximately 0.08% of its issued shares, though the reasons for the buybacks remain unclear.
Natural Gas Sales Performance: The company's natural gas sales saw a slight increase of 0.6% year-on-year for the first ten months of 2025, with industrial gas volume rebounding due to colder weather, while commercial gas volume experienced a decline of 3% year-on-year.
Analyst Rating and Target Price: BofA Securities raised its target price for CHINA RES GAS from $21 to $22.5, maintaining a Neutral rating due to high valuation, but noted a 4.6% dividend yield and buyback returns could support the stock price.
Market Context: The stock is currently facing short selling pressures, with a short selling ratio of 24.748% and a total short selling value of $37.33 million as of November 25, 2025.
HK & China Gas and China Resources Gas Establish Strategic Partnership for AI Development and Green Transition
Strategic Cooperation: HK & China Gas and China Resources Gas Investment have formed a strategic partnership to establish a Low-Carbon Smart Gas Joint Innovation Center.
Focus on R&D: The collaboration will emphasize technology research and development across the gas industry, with a focus on AI and green transformation, aligning with China's "15th Five-Year Plan."
CHINA RES GAS Suggests Relocation of Headquarters to Hong Kong
Re-domiciliation Proposal: CHINA RES GAS plans to apply for re-domiciliation from Bermuda to Hong Kong, in line with the Companies (Amendment) (No. 2) Ordinance 2025.
Deregistration in Bermuda: The company intends to apply for deregistration in Bermuda after receiving the certificate of re-domiciliation from Hong Kong's Companies Registry.
Further Announcements: Additional details regarding the re-domiciliation and related proposals will be announced in due course.
Market Activity: The stock experienced a slight decline of 0.192%, with significant short selling activity reported at $5.72 million.
<JPM Research> Positive Outlook for China's Photovoltaic Industry; Stock Picks Should Emphasize Earnings Growth Potential While Maintaining Caution on Gas Sector
Offshore Wind Turbine Procurement: China's offshore wind turbine procurement capacity reached 8.42 gigawatts last year, with MINGYANG SMART ENERGY leading at 2.1 gigawatts and GOLDWIND at 1.2 gigawatts, driven by positive market sentiment.
Stock Recommendations: JPMorgan recommends focusing on companies with strong earnings growth, such as ORIENT WIRES & CABLES, DAQO New Energy, and GCL TECH, while the A-share photovoltaic industry index has outperformed the market.
Energy Storage Growth: China's installed capacity of energy storage systems surged by 73% year-on-year, with SUNGROW POWER expected to benefit from policy reforms and increased demand in high-end markets.
Cautious Outlook on Gas Utilities: JPMorgan maintains a cautious view on China's gas utilities sector due to weak growth and profit margins, with KUNLUN ENERGY identified as a top pick, while CHINA RES GAS faces challenges with slow share buybacks and weak operating trends.
Daiwa's Ratings and Target Prices for Gas Stocks (Table)
Stock Performance: HK & China Gas remains stable with no change in share price, while China Res Gas has seen a slight decline of 0.120 (-0.560%).
Short Selling Data: Significant short selling activity is noted across the companies, with HK & China Gas at $29.80M (28.257% ratio) and China Res Gas at $42.00M (35.576% ratio).
Analyst Ratings: HK & China Gas has been upgraded from "Hold" to "Outperform" with a target price increase from 7.1 to 7.7, while China Gas Hold maintains an "Outperform" rating with a target of 8.3.
Market Outlook: Daiwa has upgraded its view on the CN natural gas sector to "Neutral," expecting improved fundamentals in 2026.
JPM: ENN ENERGY's Privatization Plan Delayed; KUNLUN ENERGY Recommended for Focus
ENN Energy Privatization Delay: ENN Energy has extended the deadline for dispatching its privatization scheme document to no later than January 30, 2026, due to the need for more time to meet pre-conditions, which was anticipated by the market.
Impact on Share Prices: JPMorgan believes the delay in ENN Energy's privatization scheme may have a slight negative effect on its share price, while its H-shares are viewed as offering better risk-return compared to A-shares.
China Gas Hold Performance: China Gas Hold reported a 24.2% decline in interim net profit for 1HFY2026, with weak operational indicators, but is expected to see a gradual recovery in gas sales over the next few months.
Market Opportunities: JPMorgan suggests that investors consider market entry opportunities in KUNLUN Energy, which is projected to achieve over 5% sales growth in 2H25, alongside improvements in gas sales for other companies like China Resources Gas.
BofAS Raises Target Price for CHINA RES GAS (01193.HK) to $22.5 Following Improved October Natural Gas Sales
Share Buybacks: CHINA RES GAS initiated share buybacks on November 20 and 21, repurchasing a total of 1.77 million shares, which is approximately 0.08% of its issued shares, though the reasons for the buybacks remain unclear.
Natural Gas Sales Performance: The company's natural gas sales saw a slight increase of 0.6% year-on-year for the first ten months of 2025, with industrial gas volume rebounding due to colder weather, while commercial gas volume experienced a decline of 3% year-on-year.
Analyst Rating and Target Price: BofA Securities raised its target price for CHINA RES GAS from $21 to $22.5, maintaining a Neutral rating due to high valuation, but noted a 4.6% dividend yield and buyback returns could support the stock price.
Market Context: The stock is currently facing short selling pressures, with a short selling ratio of 24.748% and a total short selling value of $37.33 million as of November 25, 2025.
HK & China Gas and China Resources Gas Establish Strategic Partnership for AI Development and Green Transition
Strategic Cooperation: HK & China Gas and China Resources Gas Investment have formed a strategic partnership to establish a Low-Carbon Smart Gas Joint Innovation Center.
Focus on R&D: The collaboration will emphasize technology research and development across the gas industry, with a focus on AI and green transformation, aligning with China's "15th Five-Year Plan."
CHINA RES GAS Suggests Relocation of Headquarters to Hong Kong
Re-domiciliation Proposal: CHINA RES GAS plans to apply for re-domiciliation from Bermuda to Hong Kong, in line with the Companies (Amendment) (No. 2) Ordinance 2025.
Deregistration in Bermuda: The company intends to apply for deregistration in Bermuda after receiving the certificate of re-domiciliation from Hong Kong's Companies Registry.
Further Announcements: Additional details regarding the re-domiciliation and related proposals will be announced in due course.
Market Activity: The stock experienced a slight decline of 0.192%, with significant short selling activity reported at $5.72 million.
