CCB International released a research report stating that it has lowered KUNLUN ENERGY's (00135) core earnings forecasts for 2025-2027 by 5% and slightly reduced the target price from HK$8.7 to HK$8.5, while maintaining an "Outperform" rating. The firm noted that KUNLUN ENERGY's first-half net profit declined 4.4% to RMB 3.2 billion, primarily dragged down by a 10.5% year-on-year decrease in natural gas sales volume and a 3% drop in liquefied petroleum gas (LPG) pre-tax profit, which offset the 11% growth in pre-tax profit from LNG receiving terminals and processing operations. Despite the profit decline, the interim dividend still rose slightly by 1.2% year-on-year to RMB 0.166, with the payout ratio increasing from 43% last year to 45.5% in the first half of this year.

The report noted that factors including warm winter weather and leasing gas stations to the parent company led KUNLUN ENERGY's retail natural gas sales growth to slow from 8.1% last year to 2.2% in the first half of this year. Considering the normalization of the vehicle natural gas sales base in the second half, accelerated contributions from new gas projects in the second half, and potentially favorable weather conditions, the company targets 5% year-on-year growth in full-year retail natural gas sales, implying 7.7% year-on-year growth in the second half.

The firm expects the company's unit gross margin to remain stable in the second half, based on stabilizing natural gas sales structure and weak overall procurement costs. It also expects continued improvement in LNG processing plant profits, which should help offset the impact of weak gas sales profit for the full year.