Citigroup has issued a research report maintaining a "Buy" rating on Kunlun Energy (00135) with a target price of HK$8.4. The company's net profit for the previous year decreased by 10.3% to RMB 5.346 billion, which was 12% below market expectations. Core profit fell by 6.9% to RMB 5.923 billion. The annual dividend per share remained at 31.58 fen, while the dividend payout ratio increased by 5.2 percentage points to 51.1%.

Notably, pre-tax profit from the natural gas sales business declined by 17.6% to RMB 6.756 billion, with gross profit per unit dropping by RMB 0.02 to RMB 0.45 per cubic meter. In comparison, peers Hong Kong and China Gas and Towngas Smart Energy saw their respective unit gross profits increase by RMB 0.02, reaching RMB 0.54 and RMB 0.58 per cubic meter.

The report indicated that natural gas sales volume grew by 9.4% to 59.26 billion cubic meters. Retail gas volume increased by 2.3% to 33.51 billion cubic meters, while distribution and trading gas volume rose by 20.2% to 25.75 billion cubic meters. Within retail gas sales, industrial gas consumption grew by 6.2% to 26.05 billion cubic meters. However, residential gas consumption fell by 4.4% to 3.45 billion cubic meters, commercial gas usage declined by 2.3% to 2.92 billion cubic meters, and gas consumption at refueling stations dropped by 33.5% to 1.09 billion cubic meters.

The decrease in unit gross profit was primarily due to a decline in the average selling price by RMB 0.11 to RMB 2.73 per cubic meter, while the average procurement cost decreased by RMB 0.09 to RMB 2.28 per cubic meter.

The total gasification and loading volume at the two liquefied natural gas (LNG) receiving terminals increased by 3.7% to 16.527 billion cubic meters, with the average utilization rate rising by 3.2 percentage points to 90.8%. Processing volume at the 14 LNG plants grew by 5.3% to 3.737 billion cubic meters, and the average utilization rate increased by 3.2 percentage points to 67.2%. However, revenue decreased by 11.8% to RMB 3.88 billion, reflecting a lower average selling price.

Liquefied petroleum gas (LPG) sales volume increased by 6.3% to 6.15 million tons, but revenue declined by 2% to RMB 25.091 billion.

Kunlun Energy's operating cash flow for the previous year was RMB 12.585 billion, a slight decrease of 1.2% year-on-year. Capital expenditure fell by 4.6% to RMB 6.257 billion. The net debt ratio decreased by 2.7 percentage points to 18.8%, and the average cost of debt declined to 2.54%.