Urban Gas Utility Sector Challenges: The urban gas utility sector is experiencing a slowdown in gas sales growth and a decline in new users, although profit margin expansion has mitigated some negative impacts, according to HSBC Research.

Sales and User Projections: HSBC Research anticipates stable retail gas sales in the second half of 2025, but expects a 16% year-over-year decrease in new users for TG SMART ENERGY in 2025, with gas prices likely increasing due to a hike in August 2024.

Broker Ratings and Target Price Adjustments: Daiwa has upgraded the CN gas industry rating to Neutral and HK & CHINA GAS to Outperform, while maintaining a Buy rating on TG SMART ENERGY but lowering its target price from HKD4.7 to HKD4.

Earnings Forecast Revisions: HSBC Research has revised down its earnings forecasts for TG SMART ENERGY by 6-7% and for HK & CHINA GAS by 7-8% due to reduced contributions from the renewable energy sector.

Company Listing Plans: EcoCeres, a renewable fuel company backed by HK & CHINA GAS, is preparing for a potential Hong Kong listing with Deutsche Bank, HSBC, Morgan Stanley, and UBS assisting in the process, aiming for a listing within this year.

Previous Listing Considerations: Earlier reports indicated that EcoCeres was considering a European listing, specifically targeting the London Stock Exchange, with plans to raise between US$500 million to US$1 billion and achieve a valuation of US$5 billion.

Earnings Recovery: HK & CHINA GAS has shown improvement in its fundamentals due to a recovery in earnings from its green fuel business, as noted in a Daiwa research report.

Subsidiary Restructuring: The potential spin-off of its subsidiary EcoCeres after 2026 may lead to increased dividends per share, despite EcoCeres reporting a significant net loss last year.

Rating Upgrade: Daiwa has upgraded HK & CHINA GAS's rating from Hold to Outperform, with a revised 12-month target price increased from HKD7.1 to HKD7.7.

Market Outlook: The recovery of sustainable aviation fuel prices and new capacity additions are expected to contribute to HK & CHINA GAS's turnaround in the second half of 2025.

Earnings Forecast Revision: Citi Research has lowered its earnings forecasts for HK & CHINA GAS for 2025-2027 by 2-5%, primarily due to reduced contributions from its subsidiary TG SMART ENERGY and anticipated foreign exchange losses.

Target Price and Rating: Despite the earnings forecast revision, Citi maintains a target price of $7 for HK & CHINA GAS and rates it as Neutral, noting that its 2025 earnings forecast is 8% below market consensus.

Dividend Concerns: The broker estimates that HK & CHINA GAS will maintain its dividend per share at $0.35, resulting in a dividend yield of 5%, which is a key concern for investors.

Sector Preferences: In the Hong Kong utilities sector, Citi Research prefers GUANGDONG INV, rating it as Buy with a projected 2025 dividend yield of 4.9%.

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.