BEH’s 1H 2022 Beats Expectations; 25% Interim DPS Growth Drives an Attractive Dividend Yield

Beijing Enterprises’, or BEH’s, 10.8% year-over-year growth in first-half 2022 recurring net profit to HKD 5.5 billion slightly beat our expectations, mainly attributable to better contribution from its Russian upstream business, boosted by higher oil prices and the appreciation of the ruble. Coupled with higher natural gas sales, profit contribution from gas operation was up 23.6% year over year. We raise our 2022 recurring net profit forecast by 10% to CNY 8.9 billion, after updating our oil prices and foreign exchange assumptions. Our midcycle outlook remains unchanged, and we retain our forecast that the company’s recurring net profit will grow at a five-year CAGR of 3.5% through 2021-26. Our fair value estimate is maintained at HKD 39.50 per share, and we continue to believe the shares are undervalued currently, trading at only 0.3 times of price/book—a significant discount relative to its underlying assets.