BoCom International released a research report saying that it maintained ENN Energy's "neutral" rating (02688) and lowered the company's core profit forecast for 23-25 years by 13%, 17%, 19%, to reflect the adjustment of gas sales structure, and the target price was reduced to HK $72.10 (originally HK $115.1). Until the growth trend of gas sales becomes clearer and better progress is made in the price of civil gas, there is still pressure on valuation repair.

The main points of BoCom International are as follows:

ENN Energy's core profit fell 5 per cent in the first half from a year earlier, lower than the low-unit growth expected by the market. Among them, retail gas volume unexpectedly fell by 7% compared with the same period last year, mainly because the company adjusted the industrial gas sales structure and stopped supplying gas to self-provided power plants with low gross margin, so industrial gas sales decreased by nearly 1 billion square meters in the first half of the year. Excluding this part of the impact, the overall gas sales of industrial and commercial users fell slightly by 1-2% compared with the same period last year. The overall gross margin rebounded to 0.52 yuan per cubic meter from 0.5 yuan per cubic meter in the same period last year, in line with the bank's expectations. Pan-energy business still maintained good growth, energy sales rose 45 per cent year-on-year to 15.7 billion kilowatt-hours, sector gross margin rose 30 per cent year-on-year, accounting for 13 per cent of the company's overall gross margin.

Management guidelines are more conservative in the second half of the year.

As for the adjustment of gas sales structure, the bank understands that it will help the company to improve its medium-and long-term gross margin; however, the bank believes that timely and adequate communication with investors can help ease market sentiment, because the company's retail gas growth has exceeded the national gas consumption growth rate in the past. In addition, the management takes a more conservative view on the progress of civil gas price, which is more concerned by the market. As there is still a time lag in the implementation of the actual price, the annual gross margin guideline is only 0.51 yuan per cubic metre. With regard to the management rights of the Changsha project recently concerned by the market, the management said that it had been renewed for 10 years, and that the gas management rights on hand were all over 10 years. The bank believes that this will help ease investors' concerns about the company's sustainable development.

Cut the 23-year retail volume forecast, LNG trading profits will gradually decline.

The bank estimates that the company's annual retail gas volume fell 4.6% from the same period last year. Excluding power plant gas that has been cut off, the remaining industrial and commercial gas sales are estimated to grow by 5% in the second half of the year compared with the same period last year. It is estimated that overall industrial and commercial gas sales fell by 5% in the second half of 2003 compared with the same period last year. Private gas rose 6.5% year on year for 23 years. In addition, the bank expects gross profit from wholesale natural gas in 23 years to fall by about 34% to 1.8 billion yuan from the same period last year, including profits from LNG transactions, and gross profit from wholesale natural gas in fiscal year 24 / 25 is expected to fall further to 1.1 billion yuan / 800 million yuan. The number of new connections in 23 years is expected to remain at 1.95 million tons.