Company Reports

ENN Energy Holdings is a privately owned gas utility company in China engaged primarily in distributing and retailing natural gas. We are confident that ENN will generate returns above its cost of capital over the next decade, supporting our narrow moat rating.

ENN Energy's first-half core profit fell 1% year over year, while China Resources Gas' net profit rose 1%. Earnings reflected weak retail gas volumes and lower connection income, with new residential connections declining 22%-27% at both companies.

The proposal by ENN Natural Gas to privatize ENN Energy lapsed on June 12, as certain required regulatory approvals had not been obtained. The shares are down by about 29% year to date.

ENN Energy’s first‑quarter 2026 retail gas sales volume rose 0.5% year on year, while integrated energy sales declined 7.0%. New residential connections fell 28.2% to 206,000.

ENN Energy Holdings is a privately owned gas utility company in China engaged primarily in distributing and retailing natural gas. We are confident that ENN will generate returns above its cost of capital over the next decade, supporting our narrow moat rating.

ENN Energy’s 2025 core profit fell 3%, reflecting subdued retail gas and integrated energy sales volumes. China Resources Gas saw a similar trend, with net profit declining 13%. New residential connections dropped 14%-20% for both companies.

China Gas Holdings’ first-half fiscal March 2026 net profit fell 24% year on year, mainly due to weaker contributions from associates and joint ventures, lower other income, and reduced connection profit.

For the first nine months of 2025, China's apparent natural gas consumption fell 0.2% year on year. The country's slowing economic growth has placed pressure on sales volumes of China gas utilities.

ENN Energy's first-half 2025 core profit from domestic businesses rose 1% year on year. Notably, gross profit growth in its integrated energy, or IE, and smart home segments slowed to 2%-5%, from 17%-23%, a year ago.

ENN Energy Holdings is a privately owned gas utility company in China engaged primarily in distributing and retailing natural gas. We are confident that ENN will generate returns above its cost of capital over the next decade, supporting our narrow moat rating.

ENN Energy Holdings is a privately owned gas utility company in China engaged primarily in distributing and retailing natural gas. We are confident that ENN will generate returns above its cost of capital over the next decade, supporting our narrow moat rating.

ENN Energy's first-quarter 2025 retail gas sales volume was flat, while the sales volume of integrated energy grew by 9.9%. Meanwhile, new residential connections declined by 16.3% to 287,000.

ENN Energy Holdings is a privately owned gas utility company in China engaged primarily in distributing and retailing natural gas. We are confident that ENN will generate returns above its cost of capital over the next decade, supporting our narrow moat rating.

ENN Energy's 2024 core profit from domestic businesses rose 10.2% year on year, in line with guidance. Parent company, ENN Natural Gas, or ENNNG, proposed to privatize ENN by offering 2.9427 new ENNNG H-shares and HKD 24.50 cash per ENN share.

China Gas Holdings’ first-half fiscal 2025 (ending March) net profit was down 4% year on year to HKD 1.76 billion. This was attributable to weaker retail gas sales volume, loss-making joint ventures, falling contribution from the LPG segment, a higher tax rate, and increased minority interests.

ENN Energy’s cumulative nine-month operating data is in line with our expectations. Retail gas sales volume rose 4.8% year on year, while sales volume of integrated energy grew 21.4%. Dollar margin was CNY 0.54 per cubic meter with new residential connections of 1.1 million.

After factoring in weak first-half results, we cut ENN Energy’s fair value estimate to HKD 72 per share from HKD 88. Core profit of CNY 3.3 billion was down 17% year on year, mainly due to a lower LNG trading gain of CNY 183 million versus CNY 1.1 billion a year ago, partly offset by stronger domestic businesses. While operating statistics align with management guidance, these came in at the lower end of targets, with margins falling short of our expectations. Hence, we cut 2024-26 earnings forecasts by 14%-20%. We believe current share price looks attractive, with ENN trading at a 2024 price/book ratio of 1.1 times and a dividend yield of more than 5%. ENN aims to pay 44% of core profit as dividends in 2024, and we expect it will gradually increase to 50% given ENN’s healthy balance sheet and stable cash flow. We think near-term share price performance will remain volatile given China’s weak macroeconomic conditions and the sluggish real estate sector.

ENN Energy Holdings is a privately owned gas utility company in China engaged primarily in distributing and retailing natural gas. We are confident that ENN will generate returns above its cost of capital over the next decade, supporting our narrow moat rating.

We think the China city gas sector is currently undervalued, but our preferred pick is ENN Energy, given its well-diversified earnings supported by its integrated energy, or IE, segment and value-added business, or VAB. Following the in-line first-quarter operating data from ENN, we keep its fair value estimate at HKD 88 per share. We believe the data supports our view of a gradual recovery for the industry and should be a positive read across for China Gas Holdings, or CGH, and China Resources Gas, or CRG, where we maintain our fair value estimates of HKD 12.50 and HKD 30.00 per share, respectively.

Narrow-moat ENN Energy’s 2023 net profit of CNY 6.8 billion was below our expectation. That said, core net profit declined 5% year on year and was in line with management guidance. We cut ENN’s fair value estimate to HKD 88 per share from HKD 102 after factoring in slower growth for the integrated energy, or IE, and value-added, or VA, businesses. However, we believe the shares are currently undervalued. Although we don’t expect the firm to post strong earnings growth as the industry is maturing, trading at below 10 times 2024 P/E, we think ENN’s valuation is attractive with a three-year earnings CAGR of 8% and estimated 2024 dividend yield of more than 4%. The 2023 dividend payout ratio is 40% of core profit, and we expect the ratio will gradually increase to 50%. The firm also has prudent financial management with free cash flow of CNY 2.1 billion in 2023, and this should support its capital expenditure and dividend payment.