BofA Securities Upgrades Hong Kong and China Gas to 'Neutral', Raises Target Price to HK$7

Stock News07-20

BofA Securities has revised its investment rating for Hong Kong and China Gas Co Ltd (HKG: 0003) from "underperform" to "neutral" and increased its target price from HK$6.5 to HK$7, based on an updated discounted cash flow (DCF) model and a lower beta value.

The firm noted that the company's improved earnings and cash flow outlook for 2026, alongside a recovery in sustainable aviation fuel (SAF) prices and potential asset monetization—including the rumored potential listing of EcoCeres in the second half of 2026—bolster confidence in its ability to maintain a fixed dividend payout.

BofA anticipates that Hong Kong and China Gas will report a 10% year-on-year increase in net profit for the first half of 2026, surpassing the previously expected high-single-digit growth. This improvement is primarily attributed to EcoCeres returning to profitability.

Benefiting from a significant rise in SAF prices and a doubling of production capacity, EcoCeres is expected to contribute approximately HK$300 million in profit, which is sufficient to offset a slight decline in the company's mainland China and Hong Kong operations.

BofA has lowered its earnings per share forecasts for Hong Kong and China Gas for the fiscal years 2026 to 2028 by 3% to 7%, reflecting factors such as reduced gas consumption in Hong Kong and cautious returns from mainland utility operations.

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