CICC has released a research report maintaining its earnings forecasts for Beijing Holdings (00392) for 2025 and 2026 unchanged. The current share price corresponds to 2025/2026 P/E ratios of 6.8x/6.7x respectively. The firm maintains its Outperform rating and HK$35 target price, representing 7.4x 2025 P/E and 7.2x 2026 P/E, with 8.2% upside potential from the current share price.

The company announced its H1 2025 results with revenue of 44.5 billion yuan, up 5.2% year-on-year; net profit attributable to shareholders of 3.44 billion yuan, up 8.1% year-on-year; and operating profit attributable to shareholders of 3.28 billion yuan, up 4.1% year-on-year, meeting expectations. The company proposed an interim dividend of HK$0.85 per share, unchanged year-on-year.

CICC's main viewpoints are as follows:

H1 2025 Performance Beijing Gas achieved total natural gas sales volume of 12.51 billion cubic meters in H1 2025, up 5.5% year-on-year, of which pipeline gas sales within Beijing city reached 9.19 billion cubic meters, down 1.7% year-on-year. Pre-tax profit from natural gas distribution and trading business was 970 million yuan, up 13.2% year-on-year.

Regarding joint ventures/associates, the company recorded investment income of 1.26/0.33/0.31/0.37 billion yuan from National Pipeline Network Beijing Pipeline/VCNG/China Gas/Beijing Enterprises Water respectively in H1 2025, remaining generally stable.

Nangang LNG Processing Agreement Implementation Expected to Enhance Beijing Gas Profitability Stability In H1 2025, Beijing Gas leveraged the Nangang LNG project to sign a 3-year LNG processing contract totaling 4.5 million tons with major domestic suppliers. Based on Beijing Gas's own LNG long-term contract resources fulfillment and the processing contract implementation, CICC believes the increased LNG receiving income may partially cover the additional costs from Nangang LNG project operations, overall improving Beijing Gas's profitability stability.

Steady Debt Structure Optimization Benefiting from lower domestic financing rates and the company's adjustment of some foreign currency interest-bearing debt to RMB debt, the headquarters' finance costs decreased by over 100 million yuan year-on-year in H1 2025. Looking forward, CICC believes that with further increases in subsidiary dividends, the company's interest-bearing debt scale may also have some room for decline.

Stable 2025 Dividend with Medium to Long-term Upside Potential The company maintained its interim dividend at HK$0.85 per share unchanged in H1 2025, and management committed during the earnings conference that full-year dividends will be distributed based on the higher of 1.62 HK dollars per share (corresponding to final dividend distribution of HK$0.77 per share) and 35% of 2025 operating profit.

Looking ahead, based on the company's stable utility nature and Beijing Gas's capital expenditure cycle nearing completion, CICC judges that the company's medium to long-term dividend still has room for improvement.

Risk Factors: Significant LNG price increases, substantial oil price declines.