【CLP003 EARNINGS】China Gas: Pricing Pressure This Year, Difficult to Assess Specific Increase for Now; 2025 Final Dividend Maintained at 23 Cents

China Gas (00003) Managing Director Huang Weiyi was asked at the 2025 full-year results briefing whether there are plans to raise local customer gas prices this year. Huang Weiyi indicated that there is pressure to increase prices, citing reasons such as Hong Kong’s CPI having risen by 5% to 6% over the past two years, rising prices alongside wage increases, and development in the northern metropolitan area involving preliminary work. However, he said it is too early to comment on specific increases. The company is maintaining good communication with the government, which is also aware of the company’s pricing pressure.

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Natural gas raw material prices are not significantly affected. The company signed a 25-year long-term contract with an Australian supplier early on

Recently, international energy prices have been highly volatile due to developments in Iran. Huang Weiyi stated that for Hong Kong gas supply, the raw materials including naphtha and natural gas come from Malaysia, New Guinea, Australia, and other regions. The natural gas supply, in particular, was secured through a 25-year contract signed with an Australian supplier in 2006. This contract is a “take or pay” agreement: “The supplier will deliver the gas to us, and we must accept it. The price was fixed in 2006 based on a formula. Therefore, even if international natural gas prices increase significantly now, it won’t have a big impact on the company’s raw material costs.”

Huang Weiyi said that currently, the company produces Hong Kong gas with a ratio of 60% natural gas and 40% naphtha. As for naphtha, there is no long-term contract. If naphtha prices rise in the coming months, the company can increase natural gas supply as raw material, potentially raising the natural gas proportion to 70%. Overall, the gas price trend in Hong Kong remains quite stable.

Mainland China gas supply mainly from Middle Eastern liquefied natural gas

Regarding gas supply in mainland China, Huang Weiyi said that the company mainly supplies natural gas to mainland cities via pipeline, sourcing domestically and importing from Russia, Myanmar, Central Asian countries, and others. A small portion of liquefied natural gas comes from the Middle East, but the share of Middle Eastern LNG in the company’s mainland gas demand is very low, so overall supply is unlikely to be affected in the coming months.

Core profit in 2025 to increase by 4% annually

China Gas expects its 2025 after-tax operating profit and core business profit to be HKD 7.5 billion and HKD 6 billion respectively, representing a 2% and 4% increase year-on-year. After accounting for non-operating gains and losses and property revaluation changes, the attributable profit to shareholders is HKD 5.69 billion, a slight decrease of 0.4%. The company proposes a final dividend of HKD 0.23 per share, unchanged from last year. Total dividends for 2025 are HKD 0.35 per share, also flat year-on-year.

China Gas reported a consolidated revenue of HKD 54.33 billion, down 2% year-on-year. The company said that the 2025 revenue was affected by various factors, including the gas tariff adjustment in Hong Kong last August, continued improvement in mainland pipeline gas prices, but the sluggish mainland property market led to fewer new gas connection customers.

In 2025, non-operating gains and losses resulted in a net loss of HKD 310 million, a 6.1-fold increase from the previous year; basic earnings per share fell slightly by 0.3% to HKD 0.305.

In 2025, gas sales in Hong Kong totaled 27,181 million gigajoules, roughly unchanged from the previous year; mainland city gas sales reached 36.348 billion cubic meters, also roughly stable. As of December 31, Hong Kong had 2.056 million customers, up 0.9% year-on-year; mainland city gas customers numbered 44.265 million, up 4%.

Hong Kong residential gas sales increased by over 2% in 2025

Regarding Hong Kong’s gas business, China Gas said that in 2025, more frequent typhoons and cooler weather after autumn led to a 2.4% year-on-year increase in residential gas sales. The company added over 19,000 new residential customers in Hong Kong. In the commercial and industrial sector, benefiting from the opening of the third runway at the airport and the southward movement of the Guangdong-Hong Kong-Macao Greater Bay Area, industries related to tourism (such as hotels, theme parks, laundry factories) contributed to sales volume. However, changing consumer habits among Hong Kong residents continued to impact the local market, putting pressure on the catering and retail sectors, resulting in a 2.6% decline in commercial and industrial gas sales, offsetting some residential growth. Overall, gas sales increased slightly by 0.1% in 2025.

For mainland China gas business, including subsidiaries Towngas China Smart Energy Limited (01083), the company’s total number of urban gas projects in mainland China reached 325 across 23 provincial-level regions in 2025, with 1.78 million new customers. Total gas sales for the year were 36.35 billion cubic meters, roughly the same as the previous year.

Huang Weiyi mentioned that due to geopolitical issues and international tariffs, some industrial customers in mainland China may consider relocating production to Southeast Asian countries. He hopes that the US-China tariff issues can be properly resolved. Additionally, after a decline in property prices, the real estate market remains sluggish, and he hopes the mainland can properly handle the housing situation to restore rigid demand.

Regarding water and environmental services, the group’s water and environmental businesses continued to grow this year, boosting profits. Water sales reached 1.66 billion tons, up 0.6% year-on-year, and solid waste processing volume reached 1.72 million tons, up 7%.