Investors, analysts, good afternoon. Welcome to the FY 2026 annual results press conference.

Please let me introduce the management present here today: Mr. Liu Minghui, Chairman and President; Mr.

Huang Yong, Executive Director and Executive President; Mr. Kevin Zhu, Executive Director and Chief Operating Officer; Ms.

Cathy Liu, Executive Director and Vice President; Mr. Frank Li, Vice President; and Mr.

Rock Tan, General Manager of Capital Management. We would now invite Mr.

Liu to give some opening remarks.

Good afternoon, everybody. Thank you for joining us at the results announcement conference of China Gas.

Thank you for your support over the years. Thank you for your trust in us.

Today we are going to present to you our performance over the past year. We look forward to your questions and comments during the conversation.

Thank you.

Thank you, Mr. Liu.

Now we would invite Mr. Frank Li, Vice President, to go through the annual results and business performance.

Good afternoon, everybody. Now I am going to report to you on the business performance for FY 2026 as of the 31st March 2026.

I will cover four parts: business highlights, operation performance, financial performance, and followed by outlook. Let me start with cash flow.

Over the past year, free cash flow reached HK$4.84 billion. For four years, we've reached historic high, including two new segments, which are the main contributors of revenue and profit growth.

One of them is biomass business; the other, new energy business. The two services combined have delivered remarkable performance.

Biomass business has been promoted in the market for one year. We have signed over 9.66 steam tons for the whole year.

That's equivalent to an added value of 800 million cm of natural gas. As for new energy business, our target is to develop independent energy storage.

On the grid side, we are also developing I&C behind-the-meter storage. Now the contracted value increased to 3.8 GWh.

We have seen higher ESG ratings. All the main rating agencies have provided an A rating to our company.

Let me first of all start with natural gas business. Total gas sales was 41.4 billion cubic meters, an annual growth of 3.7%.

We have seen a slight decrease in city and township gas of 0.2%, reaching 23.4 billion cubic meters; for pipeline, 17.9 billion cubic meters, a year-on-year increase of 9.2%. Let us take a look at residential consumers.

Residential consumers saw a growth of 0.9%, and industrial consumers 1% year-on-year increase; commercial users up 4.5%; gas stations were down by 20.4% last year. Gas stations used to take up 15% of retail business, but now this sector was deeply affected by new energy vehicles, now gas stations took up only 1.4% of the total retail business.

Industrial users increased by 1% as we have seen divergence in the growth rate of different sectors. Machinery, equipment manufacturing, healthcare, and metal products, these sectors have seen high single-digit growth.

Sluggish industries were deeply affected by real estate market, which has been on the decline for many years. For example, building material, gas, and ceramics have seen less demand for energy, affected the performance in industrial gas.

Commercial users were also affected by the change in consumer behaviors and also macro market, and commercial gas was down by 4.5% year on year. I believe you have taken notice of the reports from the catering industry on the vibrancy of catering industry.

According to [Canbaodian?] , an authoritative agency reporting on performance of catering services, in last year 2025, 22.6% of the restaurants have been shut down.

That means the industry remains sluggish, and that prompted the commercial users to use less gas. Tariff and dollar margin: last year the average tariff was RMB 2.69 per cubic meter; last year the average sales price $3.24, down by 0.5 cents; and the average dollar margin $0.552 per cubic meter, up by 1.5 cents, that was better than our guidance of 1 cent.

In terms of resources, we have been expanding and optimizing the sources of gas, we can improve on procurement mix, lowering the cost through our energy map and looking at the change of resources and gas tariff. We can collectively deploy gas resources from different parts of China, lowering the procurement cost.

Of course, we're looking to working with some key accounts, and some of the industrial customers use LNG, and they're quite concerned about LNG price volatility. On the energy trading platform in Singapore, we use regional derivatives to help the big key accounts and industrial park to lock in future prices.

In international LNG trading market, our trading teams in Singapore have had good results last year through different commercial business models, including cross-selling of spot strip and also inter-period cargo swaps. We have locked in some profit, and 3 million tons of long-term contract resources, the first batch started in the second half of 2027.

Many investors are concerned about geopolitics and tariff and their impact on LNG prices internationally. There are some uncertainties, but last year we successfully started to work with upstream trading partners in signing long-term contracts, we could resell the gas, which was due for America, to the European market, monetizing on the premium, we can avoid the impact of geopolitics and tariff on the price of LNG in the future.

Then connections: last year we have finished 1.14 million new residential user connections, and that is a decrease of 18.6% compared to the previous financial year. It is also aligned with our guidance between 1 million to 1.2 million.

For industrial, that is a drop of 15.1% year on year to 2,184. In terms of commercial, it's a drop of 17.4% to 36,507.

Last year during the result, we shared that because of the development of small and micro businesses user for bottle-to-pipe gas project, in the last financial year there were 44,000 new households connected, and that is a historical high, and the growth rate of new commercial users reached 46% with a high base back in 2025. While this year there were 36,507 new connections, it is back to normal trends.

By the end of this financial year, the penetration rate of residential users reached 74.4%. Then let's look back to our industry, traditional gas industry.

We believe in the coming year this is a period for us to gain value recuperations. We need to follow up with asset benefit strategy and resource strategy, operational strategies, to gain premium through management and smart tradings.

We all know that according to national policy, the effective return on asset is set as 7%, while the actualized ROA was around 3%. Back in 2017, the country issued policies that in 2023 to '24, we need to emphasize on the pass-through policies implemented by local government.

In the future coming years, the gas industry needs to work together to encourage local governments to follow through the policies so that gas companies can return to a good dollar margin and reasonable return. In terms of resources strategies, the group has leveraged our trading platform in Singapore to conduct smart international tradings.

We have signed 3 million tons of LNG long-term agreement, which will start supply in 2027, and we will also actively participate in international transactions. Coming up next, LPG: our sales volume reached 3.42 million tons, which represent a year-on-year decrease of 11.6%.

Revenue, HK$14.97 billion, a year-on-year increase of 23.5%. According to well-noted reasons, the conflicts in Middle East back in March caused a surge in overall supply and energy price.

Last year throughout the year, the global energy price remained relatively low, gas consumptions decreased by more than 10% year on year, resulting in an 11.6% decrease in gas consumption. However, the decline in revenue exceeded that of the gas consumptions.

However, we have adopted effective management, especially aligned with upstream and downstream to avoid the negative impact of fluctuations on us. We have adopted tools and mechanisms in Singapore, say for example, hedging and derivative to offset such impact, and also facing internal external market demand, and to mitigate the impact of the Middle East conflicts for our procurement.

Indeed, given the challenging context, we have well managed ourselves and achieved an increase of 58% in operating cash flow and HK$82 million of operating profit. In terms of our synergies from upstream to downstream, and also in terms of our end-user retail, we have leveraged our institutionalized and systemized management mechanisms in the downside.

We have conducted asset-light collaborations with our partners to expand ourselves in retail market. In the interest of time, I will not go into details in this section.

Going next, I will talk about value-added services. In the financial year 2026, we achieved HK$3.7 billion in revenue, a slight decrease of 0.8%.

Operating profit, we have achieved HK$1.62 billion, down by 7.4% year on year. I believe we can have a consensus of China's consumer markets from the numbers in the catering industries and home appliance industries.

According to the industry data, there is a 4.3% of decline in home appliances revenues. Especially in the second half of the fiscal year, the revenue of home appliances nationwide decreased by an average of 16%, which is affected by weak macro environment and low consumer confidence.

It does not only affect home appliances only; it has a very broad-spaced implications to consumer markets in China. Also, we are affected by the downward trend of real estate industry as well.

For the incremental and the existing new houses, that has a very negative impact, which has affected the sales of kitchen appliances as well. On the profit side, you can see that the price of materials have risen quite substantially, especially the price of copper, which is a increase of 34% last year, which has affected our product, including security product and kitchen appliances such as water heaters and others, the profit margin of which has been affected.

Last year the average supply side in terms of pricing rose by 8% to 14%, which has dragged part of our profit margin. However, in terms of new business development, we are very positive, including the VAS service like technological transformations, direct drinking water supplied.

When we look at this new business model, we have already signed 120,000 household in terms of trials. In the first half of the year, the profit has reached 34 million according to our backlog, and our signing of new orders, we expect to be able to cover 500,000 household.

That profit will be around RMB 130 million to RMB 150 million. That has already been mentioned in the previous highlight of kitchen appliances, security product, and new growth.

We believe in the future sales will be driven by AI intelligent marketing, we spent more than one year to build an AI smart marketing system. While this business in itself can give us a holistic profile, as you can see, the foundation is based on a very good underlying asset, which means that we profiled our customers, including their communities, their families, demographics, and many other aspects so that we can form a precise marketing target.

That is the foundation of our AI intelligent marketing. The core of it is AI-driven sales, including AI logo, AI smart outbound calls, and photo recognitions.

In previous conversations, we talked about safety inspections that is mandatory, a safety inspector will wear an AI nameplate, which will be able to record the process with residents' consent. That will help us to improve the quality of home safety inspections.

Say for example, they may ask, 'May I record our conversations?' In fact, a lot of households' consumption data will also be directly sent back to our AI business intelligence analytics systems, which will help us to directly and accurately grasp their needs and preferences to achieve an overall consumption conversions.

After half a year, we can see that the effect of such a model has been quite significant. We have captured 1.06 million business opportunities, and the conversion is 171,000 orders with a conversion rate of 16.1%.

The converted revenue was recorded at HK$250 million. This new system has achieved a satisfactory result, and we believe this year this value-added business will cover the entire group, and we will step up our promotions.

Coming up next, I will talk about integrated energy, and I would like to spend more time to talk about it. We have two major new engines.

The first one is biomass. Biomass, as we all know that with the dual carbon, green energy policies implementing in progress, biomass has a massive potential, and the country has rolled out 15th Five-Year Plan to accelerate biomass upgrade to integrated energy supply.

The NEA also launched explicit guidance on renewable energy substitution, promote biomass transition from single-purpose generation to diversified utilization, including power, heating, gas, and fuel. This is our first year to talk about our business sector.

However, at the back, we spent three years to cover technological R&D, to innovations, to monetization, and project pilot. Before the official announcement, we have already started our promotions in the market, including Southeast Asia, Asia.

As we also mentioned, after a year of signing, we have already achieved 9.66 million tons. That is equivalent to 800 million cubic meters of natural gas for industrial users.

We have technological advantages, say for example, pyrolysis and the CHP, we can turn the biomass synthesis into high-value-added energy and high-value-added product. Say for example, the scenarios are wide, for example, green steam supply scenario and also CHP scenario, which means that through the production, the gas from biomass, the carbon, the liquid, and many other byproduct will be also supplied to the market.

The entire usage and the returns will be way higher than any standalone production. The third one is heat-conducting oil scenarios.

We also have biomass green gas utilization, green LNG scenarios within our business scenarios. Altogether, we have six directions to capture.

In Southeast Asian market, we mainly focus on three aspects: first, we are engaged in power generations of biomass and green natural gas because of the requirement of carbon reductions. The countries and regions are very strict on implementations.

The second one being CHP in the industry. We have international shipping centers along the regions, there are new policies introduced requiring the bunkering of ships at these places to gradually shift to green LNG.

That gives us room for growth for the production of green natural gas from biomass. We have also shortlisted some subsectors that is under our operations and management, the main target customers included areas like lithium battery, calcinations, iron and steel, metallurgy, glass, printing, dyeing, and chemical energies.

In terms of partners, we select top companies in those industries. We supply them with biomass energy.

The first project is in Nanjing lithium battery manufacturer biomass clean heating. The second one is in Tongling, Anhui, which was completed in February this year, and it has already been commissioned.

The third one is also lithium battery. It is a work in progress, it is still under construction, which is expected to be completed by July this year, it is just next month.

The project is large-scale and highly technical. The steam is 650,000 tons.

This steam tons is equivalent to natural gas for a factory for a year. The project in Kunming produces natural gas with glass, and in Malaysia we use biomass for combined heat and power, CHP.

This project will come to operation next year. The second driver in integrated energy services is electricity new energy.

The storage business will focus on grid-side independent energy storage, and also we are robustly developing energy storage services for I&C customers. Last year we have received two important projects from State Grid, totaling 2.8 GWh.

The cumulative operating capacity is 1.15 GWh, and the operation capacity has reached the 709.4 MWh. Last year we started to tap into the European market for energy storage.

We contracted four projects, totaling 78 MWh. One of the project in the capital of Sweden started operation, and the other three projects were in preparation stage.

What are we doing with the new energy business? Our target is to be a light-asset aggregator.

A part of it is heavy asset, and the other part will use multiple energy resources from overseas markets. Over the past couple of years, we've built the AI-enabled forecasting model, and we have covered different provinces with the projection model for electricity tariff.

The accuracy rate for spot market is over 90%. We have received the license for selling electricity from 12 provinces, and we apply for four more licenses.

Last year the electricity sale was over 7.3 billion kWh, an increase of 31% year on year. Last year in our presentation, we introduced the first virtual power plant project.

This project has been in operation already. This is based on source-grid-load-storage system, and this will enable aggregator energy storage, PV, and charging stations.

We'll also use AI and digital prediction model for the aggregator. This business will enable our company to shift from an investor in energy storage to a light-asset trading aggregator.

In the end, we will become a seller of scalable electricity services. Now we will shift to financial performance.

In 2026, revenue was $73.6 billion, down by 7.1%. As a breakdown of different business segments: connections, sales, and added-value services, I have already covered them, I will not read out the number for each category.

Actually, the decline in revenue is because that, one, LPG is down by 23.5%, the volume is down by 11%, and the procurement cost and sales price were down by 10% or more as well, in total there was a decline of 23.5%. Due to the lower number of connections, the installation business is down by 8.3%.

Last year gross profit was $10.8 billion, and net profit is down by 3.4%. Other income is $518 million, down significantly by 48%.

I will tell you why in a moment. Admin cost, selling cost, and financial cost: we have seen a tremendous decline in admin expenses.

This is the fourth year we've achieved cost reduction in admin cost, and the total cost is $6.89 billion, down by 6.3%. We have seen a tremendous increase in corporate income tax, 22.5%.

I will look into the causes in a moment. The income tax is $1.2 billion.

Profit attributable to owners of the company: $2.86 billion, down by 16.3%. Maybe many of you have a question in mind: focusing on the main business, we can see that the gross profit is down by 3%, 3.4% slightly, and in dollar terms is down by $380 million.

Other than that, selling distribution, admin expenses, financial costs are down 6.3%, in dollar terms $460 million. Although this is not available here in this chart, profit attributable to the owners of company is down by $70 million.

With the two factors combined, the number is $450 million. This is the decline in profit.

At the same time, selling distribution cost, admin expenses is also down by $465 million. We have seen that the pre-tax profits in two years are relatively at the same level.

These are the main indicators. Why is the core profit attributable to shareholders is down by 16.3% or in dollar terms $560 million?

This comes from the other two items: other income, which is down by 48% or in dollar terms $480 million; and the other factor, corporate income tax. Core profit doesn't increase, but corporate income tax is up 22.5% or in dollar terms $220 million.

Other revenue includes three items. Two of them are: number one, receivables, primarily government subsidy, this is down by $267 million.

What are these subsidies? If you were here last year for the press conference for results announcement, the headquarters building in Shenzhen received tax subsidy from the local government.

In FY 2025, we recovered $139 million of government subsidy; this was one-off. Local governments have favorable policies to high-end technology enterprises, and they've offered subsidies for transformation and renovation of dilapidated pipeline, but this subsidy is not available anymore this year.

That's why we have seen a reduction of $267 million in government subsidy. We have seen a decline in interest income of $102 million.

I believe you've seen the same thing with other companies because of the lower interest rate in both deposit and loans. Corporate tax is up $220 million due to two factors: number one, loss-making enterprises were eligible for a delayed deferred tax for five years, but some enterprises have surpassed five years, that's why the deferred tax not being offset will have to be offset this year, and the total volume is $150 million, and the deferred tax assets will be added back to the corporate income tax for this fiscal period.

This will only affect the number of profit on the balance sheet, but this doesn't have anything to do with your cash flow. That doesn't mean you have to pay the $150 million with cash.

Other numbers, $60 million, this is for payment of tax to the local government. This year we paid taxes which were due last year, all factors combined, that will lead to an increase in corporate income tax of $220 million.

Simply put, the five main business segments, through effective management, the pre-tax profit remained the same. Three items, I cannot say they're one-off, but these three non-core business, including the one-off tax item, that led to a decline of $560 million in the profit attributable to core owners.

The dividend is 35 cents. Now dividend payout ratio is 70%, the highest in the industry.

Asset liability: total assets, $157 billion; total equity, $64.8 billion. Cash in hand was up significantly.

It was up by $3.2 billion and reached $12.3 billion. For effective operation of the group, we need $8 to $9 billion in cash, but now for the first time cash was up by $3.2 billion.

Before the end of the year, we borrowed new money and we repaid the interest-bearing loans, and we were ready to repay some bank loans which were due in April. That means before the end of March, the cash on hand increased by $3 billion.

At the same time, interest-bearing liability also increased by around $3 billion. In short-term bank and other borrowings together will make the total interest-bearing loans reach $66 billion by the 31st of March this year.

If you compare end-March to end-March the same period last year, RMB was up by 4.8% against Hong Kong dollar, but 99.6% of our loans were denominated in RMB. If you recover that to a like-for-like basis, by the end of March this year, interest-bearing liabilities amounted to $63.1 billion.

That was an increase of $2.88 billion compared with the last year. Of course, cash on hand is also up $3.2 billion.

In real terms, total liabilities should be considered with the factor of interest-bearing loans without the impact of currency exchange. The interest-bearing liabilities by the end of March this year is $51.1 billion, same as last year.

Net gearing ratio is down by 1 percentage points and reached 77.7%. Looking to the cash flow, net cash flow from operating activities is $7.02 billion; net cash flow from investing activities down by $2.18 billion; and free cash flow, $4.84 billion.

We've benefited from the low interest rate of RMB-denominated loans, and we have adjusted the structure of RMB loans. One of the projects in Inner Mongolia received ultra-low interest loans.

Apart from that, all other projects were denominated in RMB, including those liability in Hong Kong. That's why the average financing cost increased from 3.84% to 3.27% [sic] last year.

Our unutilized financial resources, including available bank loan facilities and the issuance of RMB bonds, we have obtained total over RMB 130 billion. In the last part, for the guidance of next year, our dollar margin is expected to remain flat, considering Middle East conflict, which has affected the global natural gas procurement price, which will also pass on to China.

According to the current estimate, our dollar margins will remain flat compared to last year. Sales volume growth for city and township gas is remained between 0 to 2%; new residential connections, 0.9 to 1 million household; growth in gross profit or operating profit of value-added services, more than 10%.

We are confident about the future growth of value-added business. In terms of biomass gas supply, the newly signed is expected to be 15 million tons per year, plus the nearly 10 million tons we have already contracted, by March 31st next year, the cumulative contractual amount will exceed 25 million tons.

This is a brief update on our performance. Thank you very much.