The company’s net profit surged 22% YoY to HK$3.64bn in 1H26, 21% above our forecast. The strong beat mainly came from the superb performance of Eco Ceres which saw sharp rises in sales volume and ASPs. We expect its earnings to drop 17% YoY in 2H26 as the plants of Eco Ceres will undergo maintenance. Despite this, we still raise our 2026-28 earnings forecasts by 7-9%. Reiterate BUY with target price raised HK$7.82
Key Factors for Rating
The company’s strong growth was mainly driven by the sharp turnaround at its 43.9%-owned Eco Ceres which recovered from a loss in 1H25 to an attributable profit of HK$634m in 1H26. Its output doubled YoY to 320k tonnes after its new plant at Malaysia ramped up production. Prices of SAF and HVO also surged on strong demand and strength in oil price. On top of selling to airlines, the company also received orders from data centres as the latter need green energy credit.
On the other hand, the company also saw decent profit growth at gas, water and environmental businesses in China as well as extended business. All these more than offset the earnings decline at renewable energy and Hong Kong utilities. The latter suffered a 3.5% YoY decline in gas sales volume, mainly from residential users.
We expect the company earnings to drop 17% HoH in 2H26 mainly because the plants of Eco Ceres need to undergo maintenance. The one in Zhangjiagang will take about 45 days. The new plant in Malaysia will take up to 3 months for its first break as the management will take the chance to further optimise the plant’s operations. This will overwhelm the positive impact of the price hike in Hong Kong gas business in August (by HK$0.125/MJ) and the expected improvement at renewable energy.
We increase our 2026-28 earnings forecasts by 7-9% mainly to reflect the better-than-expected profitability of Eco Ceres.
Key Risks for Rating
Unexpected disruptions in operations.
Lack of progress in disposing non-core assets and / or debt reduction.
Valuation
We increase our DCF-based target price from HK$7.74 to HK$7.82 to reflect the increases in our earnings forecasts. Our target is equal to 21.9x 2026E P/E.