A research report states that the company's dividend yield is quite attractive, assigning BINHAI INV (02886) a 2025 P/E of 7.9x, corresponding to a target price of HK$1.36, maintaining a "Buy" rating. The company's continued cost reduction and efficiency improvement this year has significantly reduced financial expenses, with gross margin recovering well year-over-year. However, given that industry demand needs improvement, profit forecasts have been slightly adjusted downward. The company is expected to achieve revenues of HK$61.46/64.53/68.27 billion for 2025E/2026E/2027E respectively, representing year-over-year changes of 0.8%/+5.0%/+5.8%; net profit attributable to shareholders of HK$232/237/242 million respectively, representing year-over-year changes of +16.5%/+2.1%/+1.9%.

Event: The company announced its 2025 interim results. In the first half of the year, revenue reached HK$2.931 billion, down 17% year-over-year; gross profit was HK$310 million, down 10% year-over-year; net profit attributable to shareholders was HK$173 million, up 3% year-over-year. The company's revenue and gross profit were mainly affected by reduced gas volume due to Q1 warm winter and weak connection business. Gas volume began to recover from Q2, financial costs decreased significantly, and value-added services are expected to grow well, providing growth momentum for this year's profit. Additionally, the company's dividend policy ensures absolute dividend value, with this year's dividend yield expected to exceed 7%, which is quite attractive. Expected EPS for 25E/26E/27E years are HK$0.17/0.18/0.18 respectively.

Main viewpoints are as follows:

Gas Volume Declined Year-over-Year, Gross Margin Improved Significantly In the first half of the year, the company achieved total gas sales volume of 1.14 billion cubic meters (yoy-14%), including 830 million cubic meters of piped gas sales (yoy-13%) and 310 million cubic meters of gas transmission (yoy-18%). This was mainly due to market demand changes brought by warm winter and some customers' shutdown for maintenance during the year. Q2 piped gas volume increased 17% year-over-year, showing strong recovery. The company guides full-year total gas sales volume of approximately 2.568 billion cubic meters, up 2% year-over-year; piped gas sales volume of approximately 1.868 billion cubic meters, up 9% year-over-year.

Gross margin increased significantly year-over-year, with comprehensive gross margin of RMB0.44/cubic meter in the first half, up RMB0.07/cubic meter year-over-year, including average gross margin of RMB0.50/cubic meter for city gas, up RMB0.07/cubic meter year-over-year. This was mainly due to the company's active development of upstream channel resources, continuous decline in gas procurement costs, and ongoing advancement of residential gas price adjustments. The company guides full-year city gas gross margin of approximately RMB0.52/cubic meter, up RMB0.04/cubic meter year-over-year.

Reduced Impact from Connection Business, Value-Added Services 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 company's current structure, the proportion of connection business is declining year by year, reducing the impact from connection business. Value-added services business achieved revenue of HK$37.67 million in the first half, up 6.9% year-over-year; achieved gross profit of HK$25.40 million, up 6.9% year-over-year. In the first half, the company included value-added services in its main business, demonstrating the company's optimism and emphasis on value-added business.

Significant Results in Financing Management, Long-term Dividend Returns to Shareholders In the first half of the year, the company's financing cost was HK$45.49 million, down significantly by 39% year-over-year. This was mainly due to the company's proactive repayment of high-interest debt and reasonable adjustment of debt structure. The company persists in returning value to shareholders, planning to increase dividends by no less than 10% annually for the next three years from 2025-2027, based on HK$0.076 per share. The company's dividend guidance is based on DPS, which helps ensure the absolute value of shareholder dividends each year. Assuming this year's dividend of HK$0.0836 per share, the current dividend yield could reach as high as 7.4%, which should be quite attractive to investors.

Risk Warning: Rapid increase in natural gas costs, demand falling short of expectations, economic growth rate falling short of expectations.