BINHAI INV (02886) The haze of the warm winter clears away, multiple catalysts are all launched

BINHAI INV(02886) performance was once affected by weather and power plant shutdowns, which are one-off factors; the guidance for 2026 returns to growth, backed by the dual shareholding of Sinopec and TEDA, with a current price of only 7 times PE, dividend yield of over 7.5%, both offensive and defensive. The medium-term target price is 1.85 Hong Kong dollars. I. The haze of the warm winter has passed, and the fundamentals are back on the rise. The performance in 2025 was hindered by two one-off factors: Warm winter in the first quarter of 2025: heating gas consumption dropped significantly, and sales gas volume in the first quarter fell by 26% year-on-year. Equipment failure at Huaneng power plant: a sudden shutdown in September affected the gas transmission volume by about 40 million cubic meters. Excluding the disturbances, the annual sales volume still recorded a 4.5% growth, far better than the national natural gas apparent consumption, which only increased by 0.1%. Net profit attributable to the parent increased by 12% year-on-year to RMB 206 million, with significant improvements in gross margin restoration and cost reduction. II. Natural gas in China is still in excess supply, which may help lower gas procurement costs. Due to recent US-Iran military conflicts, international oil prices have fluctuated significantly. According to Sinopec's gas price policy, natural gas prices to some extent are linked to Brent crude oil prices. However, US President Trump stated an agreement with Iran might be reached in a few days, and it is expected that oil prices will gradually fall. In addition, with the overall excess supply situation of natural gas in China unchanged, natural gas prices are likely to gradually return to lower levels. BINHAI INV possesses the potential to sell about 2.5 billion cubic meters of gas annually in Tianjin Binhai New Area and external areas and is one of the largest independent gas distributors in the region. The residential gas price reform has also made significant progress - as of the end of 2025, a total of 19 operational areas, covering about 83% of the total civil gas volume, had completed price adjustments, and the gross margin for urban gas repair was RMB 0.51 per cubic meter (an increase of RMB 0.03 year-on-year). With the trend of "consumers are kings," and with Sinopec, the second largest shareholder, also providing gas sources, BINHAI INV may be able to obtain more competitive gas sources, and the gross margin has the opportunity to continue to improve. III. Optimizing the loan structure, continuous decline in financing costs In 2025, the company successively obtained low-interest loans from several banks and the Agricultural Bank of China, with interest rates significantly lower than the market quoted interest rates for one-year loans (LPR), resulting in the average financing interest rate for the whole year decreasing from 5.3% to 4.4% (-90bp), a significant reduction of RMB 53 million in financing costs (down by 41%). The 2026 guidance further reduces costs by RMB 10 to 15 million, and the trend is not over. IV. Clear dividend commitment: dividends will increase by no less than 10% per year from 2025 to 2027. The company promises to increase dividends by no less than 10% per year from 2024's dividend per share of HK$0.076 as the base. Calculated at the current price of around HK$1.10, the dividend yield for 2025 is as high as 7.5%, and it is expected to be 8.2% in 2026. The company has also conducted share buybacks to support the stock price, and the consecutive 13-year dividend payment record reflects the management's full confidence in cash flow. V. Value-added services are on track, forming the second growth engine. The value-added services business promoted under the "Taiyue Family" brand is gradually becoming a profitable second pillar: In 2025, revenue from value-added services increased by 14% to RMB 76.15 million, gross profit increased by 13% to RMB 50.46 million, and the comprehensive gross profit margin reached 66%. New business development: launched kitchen decoration in the second half of the year (gross profit margin 67%); e-commerce platform "Taiyue Family Living Room" went online in December. New businesses in 2026: water purification services, heating services, AI safety valves, and sales of non-residential security products. Cooperation with TEDA City: In March 2026, a strategic cooperation agreement was signed with Tianjin TEDA City to scale up to public domain customers. The management guidance for 2026 indicates a 15% increase in gross profit for value-added services, with a target gross profit of about RMB 58 million. The positioning of a comprehensive urban living services provider that combines "gas services + home services + social services" has significant rerating potential once economies of scale take effect. VI. Two major shareholders driving new business, long-term ceiling elevation On March 4, 2026, Tianjin TEDA (the largest shareholder with a stake of approximately 42.23%) and Sinopec Natural Gas (the second largest shareholder with a stake of approximately 29.55%) once again signed a new framework agreement, committing to: Gas source support: Sinopec provides sufficient gas volume guarantee and competitive gas prices. Cost discounts: Enjoy the same LNG terminal processing fees and storage discounts as Sinopec Natural Gas. Market integration: Support the company in promoting the "One Network" operation model in Tianjin Binhai New Area. Integrated energy: Investment and operation of new energy, geothermal, distributed energy storage, and biomass energy projects. Carbon asset management: Carbon asset management and carbon market capacity building. Sinopec has expressly agreed to further increase investment and strategic resource allocation, which is quite considerable for a company with a market value of only about HK$1.5 billion, in terms of potential business expansion. VII. Valuation analysis: currently only 7 times PE, target price of HK$1.85 Key financial indicators (2025 actual performance) 2026 business guidelines Valuation target (based on 2026E EPS PE) Valuation explanation: Calculated based on the 2025 EPS (RMB 15 cents, equivalent to about HK 16 cents), the current tracking PE is only 6.9 times, showing a significant discount compared to peers such as CHINA GAS HOLD (00384.HK) (PE about 11 times) and TG SMART ENERGY (01083.HK) (PE about 9-10 times). The author estimates a 15% increase in net profit attributable to the parent in 2026, corresponding to an EPS of about HK 18.5 cents, giving a reasonable PE of 10 times, resulting in a target price of HK$1.85, with a potential increase of +66%. Considering the estimated dividend for 2026 of about 9.1 Hong Kong cents, the potential total return for 12 months is over 74%. Investment recommendation: Buy in batches near the current price of HK$1.10-1.15, with a target price of HK$1.85 (medium-term) and a stop loss at HK$0.95 Key catalysts and risks Key catalysts First-quarter performance in 2026 (the warm winter base effect disappears, and gas sales volume is expected to rebound significantly) Further reduction in financing costs to boost net profit Launch of new value-added services (water purification, heating, AI safety valves, etc.) Specific implementation of agreements with Tianjin TEDA City Increased investment by Sinopec Key risks Reappearance of one-off unfavorable factors such as warm winters or power plant shutdowns Obstacles to the progress of residential gas price reform Deterioration in overall market sentiment affecting valuation This article is reproduced from "HKMoneyClub," author: Li Mingde; GMTEight edited by Feng Qiuyi.