Jingu Finance News | Most gas stocks rose, with ENN Energy (02688) up 4.04%, HK & China Gas (00003) up 2.06%, TG Smart Energy (01083) up 1.43%, and China Res Gas (01193) up 1.08%.
On the news front, JPMorgan released a research report stating that the performance of the utilities industry in the first half of the year once again confirmed the bank's positive view of the industry, with gas consumption steadily increasing (up over 5% YoY) and improvements in profit margins and free cash flow. Although the decline in new connection business was larger than expected, with ENN Energy and Res Gas seeing a YoY decline in profits of 30% to 50%, the average contribution of new connection business to industry profits for 2024 and 2025 is expected to be less than 15% to about 10%, which means that the future profitability will be better. In addition, most gas companies have committed to stable or increased dividends, making gas stocks attractive in terms of yield.
The bank continues to believe that gas stocks will benefit from improved profit prospects, cash flow, and regulatory environment. In the industry, the bank favors China Res Gas, believing that its performance in the first half of the year was strong and is expected to outperform its peers in the next three months. They also see the greatest upside potential in ENN Energy over the next 12 months, believing that the market's concerns about its sales growth and corporate governance are excessive, and have set a target price of HK$65 for the stock, with a rating of 'shareholding'.
