Binhai Investment Co Ltd (HKG: 02886) is a city gas stock that the market has largely overlooked. The group primarily operates pipeline natural gas sales, gas engineering installation, pipeline transmission services, and value-added services in mainland China, with its business closely tied to residential living and industrial and commercial gas usage. Simply put, Binhai Investment is the operator that delivers natural gas to households, factories, and commercial users, offering the stability of a utility while also benefiting from the broader direction of mainland China's energy transition.
The natural gas industry faced a challenging first half of this year. National gas consumption came under pressure due to a slower economic recovery, fluctuating industrial demand, and volatility in external energy prices. However, precisely because the macro environment was less than ideal, the fact that Binhai Investment still managed to deliver growth makes it all the more noteworthy. Over the long term, mainland China still needs to promote cleaner energy, and natural gas produces less pollution than coal, making it a key energy source for industry, commerce, heating, and residential life. As the "dual carbon" policy continues to advance, city gas companies still have room for medium-to-long-term development.
Within the industry, Binhai Investment's advantages are quite clear. The group is backed by two major shareholders, Tianjin TEDA and Sinopec, both of which provide support for gas supply sources, project expansion, and financing arrangements. The city gas industry places a premium on pipeline networks, customers, and cost control. Binhai Investment has spent years cultivating regions including Tianjin, Hebei, Shandong, and southern areas, establishing a solid user base. Compared with typical new entrants, companies that already possess pipelines and customers have stronger defensive qualities and are better positioned to unlock earnings elasticity when gas volumes increase.
Looking at the 2026 interim results, the group's revenue reached RMB 2.940 billion, up 8% year-on-year; gross profit was RMB 296 million, up 3% year-on-year; profit for the period was RMB 184 million, up 12% year-on-year; and profit attributable to shareholders was approximately RMB 180 million, up about 12.5% year-on-year. With the property market still weak and engineering installation business under pressure, the group was still able to increase both revenue and profit, reflecting the strong resilience of its core gas sales operations.
In terms of main business revenue, Binhai Investment performed quite steadily in the first half. Although revenue from engineering construction and pipeline installation declined year-on-year due to the sluggish property market, this segment's share of total revenue has already decreased, limiting its drag on overall results. In contrast, pipeline natural gas sales revenue rose to RMB 2.805 billion, up 10% year-on-year, becoming the primary driver of revenue growth. This shows the group's revenue structure is shifting more toward the stable gas sales business rather than new connection projects that are more susceptible to the property cycle. For investors, the fact that main business revenue can maintain growth in an adverse environment indicates the core business has defensive strength and lays the groundwork for subsequent earnings improvement.
The biggest highlight of this results announcement is that total gas sales volume in the first half reached approximately 1.204 billion cubic metres, up 5.6% year-on-year; of that, pipeline gas sales volume was about 922 million cubic metres, up an even stronger 11.2% year-on-year. Against a backdrop of weak national natural gas demand, Binhai Investment's gas sales volume still managed to rise against the trend, demonstrating that gas demand in its service areas is relatively stable and its residential and industrial customer base is solid. An increase in gas sales volume doesn't just mean higher revenue; more importantly, it improves pipeline network utilisation efficiency. Once gas pipelines are built, fixed costs are already in place. When the volume of gas transported and sold increases, the cost borne per unit has the potential to decline, leaving greater room for profitability improvement.
Another factor worth paying attention to is the improvement in urban gross spreads. Urban gross spread can be simply understood as the gap between the gas selling price and the gas purchase cost. A wider gross spread means the group can earn more for every cubic metre of natural gas sold. In the first half, Binhai Investment drove urban gross spread improvement by optimising gas source procurement, controlling costs, and stabilising end-market sales. For gas stocks, this is a very important earnings indicator, because when gas volumes increase and gross spreads improve simultaneously, it creates a "volume and price rising together" effect.
The increase in gross profit also confirms this point. The group's gross profit rose to RMB 296 million in the first half, but considering engineering construction and pipeline installation revenue clearly declined, the fact that gross profit still grew reflects the strong performance of the pipeline natural gas sales main business. Within that, gross profit from the pipeline gas sales segment rose substantially year-on-year, becoming the core driver supporting overall earnings. In other words, the group is gradually shifting from relying more on new connections to depending on stable gas sales and improved gross spreads, meaning its earnings quality is better than before.
The net profit growth is equally compelling. Profit for the period grew 12% year-on-year in the first half, while profit attributable to shareholders rose about 12.5%, with growth rates clearly outpacing gross profit growth. This reflects that beyond improvements in the main business, the group has also seen results in cost and financial management. If financing costs can decline further, it would help profit performance look even better. For investors, the most important thing is not a single quarter of improvement, but seeing gas sales volume, gross spreads, gross profit, and net profit all improving at the same time—this is often the beginning of a valuation re-rating.
Looking ahead to the second half, Binhai Investment deserves close market attention. The traditional gas sales business generates stable cash flow, while value-added services are also being integrated and expanded, moving from small-scale installation, gas appliance sales, insurance sales, and non-residential maintenance to home services, smart home solutions, insurance business, and extended maintenance, which can increase the value derived from each customer. Integrated energy, photovoltaic, and low-carbon projects are still in the incubation stage, but they align with mainland China's energy policy and have the potential to bring new growth drivers to the group over the long term.
On technical analysis and investment strategy, Binhai Investment's share price surged at one point in April this year, hitting a high of HK$1.27, a level not seen since July 2024. Although it subsequently failed to hold those gains and pulled back to stabilise around HK$1.05, it never broke below the HK$1.00 low, and the 9-day RSI has also managed to hold above 30, reflecting that overall share price momentum remains relatively firm. This interim results announcement, showing higher total gas sales volume, improved urban gross spreads, and better gross profit and net profit, has the potential to act as a catalyst driving the share price higher. Investors may consider buying at the HK$1.05 level, targeting a rebound toward HK$1.18, the top of the large sideways trading range, while using HK$1.00, the bottom of that range, as short-term support. If the share price falls below HK$1.00, it would be prudent to sell and cut losses. With improving fundamentals, low valuations, and the share price at the bottom of its sideways range, Binhai Investment is a stock that offers defensiveness, catalysts, and rebound potential. Combined with the company's earlier commitment to increase dividends by 10% annually from 2025 to 2027, it is an opportunity that investors seeking medium-term accumulation should not overlook.