The 2019 interim results of the Company were lower than marketconsensus and our expectations, mainly due to less profit contributedfrom the property sector and lower gas dollar margin. Total revenue ofthe Company increased 5.8% yoy to HK$20.35 billion; net profit attributableto shareholders decreased 18.8% yoy to HK$3.89 billion.
Maintain operating profit assumptions contributed by Hong Kong gasbusiness unchanged. We expect total sale of gas and cooking sets in HongKong to remain stable in the second half of 2019. Hong Kong’s gasdistribution market is a highly mature and stable market with a stablecustomer group alongside stable gas consumption.
Maintain gas sales assumption unchanged. We expect total sales ofnatural gas of the Company in mainland China to increase by 15%-20% in2019. We expect China’s natural gas consumption to benefit from theadjustment of energy consumption structure and environmental protectionpressure in the long term.
Revise down gas dollar margin of the Company. The profitability of gassales was seriously eroded in the 1st half of 2019 due to higher procurementcost of gas. We expect gas dollar margin of the Company to improve in the2nd half of 2019.
Revise down the TP to HK$20.16, but maintain "Buy".