Continued optimization of the business structure highlights operational resilience, and the undervalued Tianlun Gas (01600) configuration value is highlighted

In the first half of 2026, the reform of the urban combustion industry accelerated across the board. Policies such as safety supervision, price control, and compliance management have been implemented intensively to accelerate the industry into a new stage of standardization and high-quality development.

As transformation gradually enters the “deep-water zone,” the underlying logic of the industry accelerates from “scale-driven” to “quality-driven”. How to complete the reversal from “quantitative expansion” to “qualitative breakthrough” in the “growth rate shift” of the industry has become a must-answer question for small and medium-sized urban combustion companies to survive.

On August 28, Tianlun Gas released its 2026 interim financial report. As an important player in the domestic gas industry, this report card just provides a highly anatomical sample of the above proposition.

According to financial reports, Tianlun Gas's revenue during the reporting period was 4.331 billion yuan, up 2.1% year on year, and adjusted core profit was 97 million yuan. The steady increase in revenue not only reflects the steady growth of the basic market of Tianlun Gas's business, but also highlights the operational resilience shown by upgrading its strategy from an urban gas supplier to a comprehensive energy service provider.

Business structure optimization showed resilience, and gross profit growth in the second growth curve was close to double digits

From an industrial perspective, the overall acceleration of industry transformation is only one facet of the gas industry on the policy supervision side in the first half of 2026, while the structural pressure on the cost side and demand side is even more challenging.

On the cost side, due to the turbulence of the international situation, fluctuations in international gas prices have driven up procurement costs. Residential gas prices are controlled by people's livelihood and industrial and commercial gas prices are constrained by both market competition. There is a clear time lag in the transmission of costs to terminals, and the difference between purchase and sale prices has narrowed.

On the demand side, we are experiencing structural contraction. In the first half of 2026, the country's apparent consumption of natural gas was 206.85 billion cubic meters, down 2.4% year on year. Demand has turned negative year on year, but this is only an indication. The deeper challenge is a systematic shift in the growth engine.

The “increase in gasification rate” and “new connections” that have driven the industry in the past 20 years have stopped at the same time, and the phased increase in industrial and commercial gas consumption is weak, and the transportation and distributed energy sectors are facing a continuous increase in the effects of new energy substitution. Industry demand has gradually moved into a “stock game,” which means that the growth paradigm of urban combustion companies must shift from “epitaxial expansion” to “deep exploration of connotations” and find new value anchors through refined operations and integrated services in the stock market.

Under the multiple challenges of accelerated industry transformation and structural pressure on the demand side, Tianlun Gas continued to consolidate the competitive advantage of the core natural gas industry and actively cultivate a comprehensive service business that is highly collaborative with the main gas industry during the reporting period to further explore the value of existing resources.

In terms of gas sales business, Tianlun Gas continues to optimize gas sources. The company insists on diversified sources, scientific and technological innovation, and facility linkage to continue to consolidate gas supply guarantee capabilities. As of June 30, 2026, Tianlun Gas's cumulative medium and high pressure pipeline length reached 9763 kilometers.

On this basis, Tianlun Gas actively promotes price guidance, deepens supply and energy use services for chemical commercial users, stabilizes core customer needs, explores stock market potential; accurately studies market and user needs, and vigorously develops energy trade business.

Thanks to a number of measures, the company's total natural gas sales increased by 6.1% to 1,346 billion cubic meters during the reporting period, and the total gas sales growth rate significantly outperformed the industry level (national apparent consumption -2.4% year on year). Driven by increased sales volume, Tianlun Gas's gas sales revenue increased 8.0% to 3.93 billion yuan during the reporting period.

Among them, retail sales increased 1.5% to 893 million cubic meters, driven by 2.6% and 3.0% year-on-year increases in gas sales for residential users and industrial and commercial users, respectively. Retail business revenue increased 1.9% to 2,612 billion yuan, and the main business chassis remained steady.

The wholesale business relied on the expansion of energy trade, and gas sales increased 16.7% to 453 million cubic meters, which led to a 22.3% increase in wholesale business revenue to 1,318 billion yuan. Highly elastic growth in the wholesale sector is the key support for the company's total sales to outperform the industry.

At the same time as the gas sales business is developing steadily, Tianlun Gas relies on a huge stock of user resources to continue to expand the comprehensive service chain and enrich service categories through the two major touchpoints of normalization of household security checks and personalized gas pipeline modifications.

During the reporting period, revenue from integrated services increased 1.8% to 235 million yuan, with gross profit of 125 million yuan, an increase of 9.9% over the previous year — the gross profit growth rate was significantly higher than the revenue growth rate, reflecting an increase in the share of high-value-added businesses such as personalized kitchen decoration, which is becoming the core driving force for the profit release of integrated services.

It is worth noting that in Tianlun Gas's interim results, the company's business structure has been continuously optimized. Among them, the gas sales business increased to 90.68% of the company's total revenue, and the core business was further highlighted.

At the same time, integrated services have become the second growth curve of Tianlun Gas, accounting for 5.43% of the company's total revenue; the traditional engineering installation and service business has fallen to about 2.75% of the company's total revenue during the reporting period due to the company's active pressure drop, and the marginal impact on Tianlun Gas has gradually become negligible. Obviously, the main gas sales business and the second growth curve comprehensive service have become the core carriers of Tianlun Gas's high-quality transformation.

From “stability” to “rise”, three major logics support profit side recovery

If Tianlun Gas's performance in the first half of 2026 focuses on the word “stable”, stabilizing the scale and structure of the company's business, then entering the second half of the year, the company is expected to move from “steady” to “upward,” and the recovery in profit quality may drive substantial recovery on the profit side.

The logic of profit recovery is first reflected in gross margin repair. This is the most definitive link and the most direct source of profit elasticity. And as the commercial industry in which Tianlun Gas has an advantage, it will be the key support to drive the correction of gross errors.

Tianlun Gas's urban combustion and industrial and commercial projects are mainly in inland provinces such as Henan, Jilin, Yunnan, Shandong, and Gansu. In 2025, industrial and commercial gas use accounted for about 44.86% of the customer structure, which is far higher than the industry average. However, inland industrial and commercial users are driven by domestic demand (basic and strategic industries such as rare earths, chemicals, metals, building materials, etc.), are less affected by international trade frictions, and demand for gas consumption is rigid.

Based on this, the company digs deep into the industrial and commercial stock market through “one enterprise, one policy” customized service, tailors transformation plans for large industrial users, and maximizes the natural gas supply effect. Industrial and commercial users have less positive price conduction resistance and high gross margin repair flexibility. This is not only Tianlun Gas's strongest α compared to coastal export-oriented urban combustion, but also the most solid demand-side support for gross margin recovery to a reasonable range.

Tianlun Gas said that in the second half of the year, the company will continue to broaden procurement channels for multiple gas sources, dynamically allocate long-term cooperation and spot gas sources to hedge the risk of upstream gas price fluctuations through refined procurement; closely follow the terminal gas price linkage policy, smooth price transmission, stabilize reasonable price spreads, and ensure steady profits for the main business.

Parallel to the defect repair is the power of a large-scale twin engine. In the first half of 2026, the total sales volume of Tianlun Gas significantly outperformed the country's apparent consumption during the same period, and was very resilient. Entering the second half of the year, the company will, on the one hand, “refine operating stock users and dig deeper into industrial and commercial gas usage potential” to stabilize the basic gas sales market based on rigid demand from inland domestic demand-oriented industries; on the other hand, “seize urban renewal opportunities to expand residential users and rely on high LPG prices to promote gas replacement for non-resident users” to activate new demand. There is a high degree of certainty that the gas sales business will continue to develop steadily under the dual cycle of deep stock cultivation and incremental expansion.

If gross margin repair and scale growth are the “two wings” of Tianlun Gas's profit recovery, then the high gross margin of integrated services is the “winner” of improving the company's profit quality. In the first half of 2026, the gross profit growth rate of the company's integrated services was far higher than the revenue growth rate, which directly confirmed the endogenous optimization of the business structure, and it can be estimated from comprehensive service revenue of 235 million yuan and gross profit of 125 million yuan during the reporting period. The gross margin of the business reached 53.19%, far higher than the company's overall gross margin level of 9% during the reporting period. This is enough to show that the business played an important role in repairing the company's profit side.

However, the key to the high gross profit of integrated services is that this kind of deep operation based on existing users does not require additional money to acquire customers, so it can generate higher unit profits. This is the fundamental reason why the gross profit growth rate of integrated services far exceeds the gas sales business and is hardly affected by fluctuations in the gas volume cycle.

Tianlun Gas said that in the second half of the year, the company will use normalized household security as a service entry point, use standardized and specialized inspection services to consolidate user trust, accurately explore diversified derivative service needs; promote personalized gas modification business in an orderly manner, unify construction guidelines and service processes, continuously optimize user experience, and shape a reputation for quality services. At the same time, the company focuses on the safe and smart kitchen circuit, vigorously promotes its own brand, builds the core advantages of the “safety, quality and health” brand, and continuously enhances the revenue contribution and development resilience of the integrated service sector.

It is foreseeable that, with the cumulative number of pipeline gas users of over 6 million households, Tianlun Gas's integrated service sector is expected to continue to expand, and as the share of the high-margin business continues to increase, the business's contribution to Tianlun Gas's profit will move from “icing on the cake” to a “profit pillar”. At that time, Tianlun Gas's high-quality development will be more valuable.

Summary:

The mid-term performance of Tianlun Gas deserves the most attention from the market. It is not a few isolated growth figures, but a closed operating flywheel: steady growth on the scale side has gained time and space for structural transformation; and continuous optimization on the structural side, in turn, has saved potential energy for profit-side repair.

The core driving force of this type of flywheel comes from the internal effects of two-wheel collaboration: “integrated gas belt service and integrated service to promote gas” has formed a complete closed loop. This also means that the company is speeding up the upgrade from a single energy supplier to a comprehensive operation service provider covering the entire life cycle needs of users, which has been substantially confirmed in financial reports.

However, the market is not fully aware of Tianlun Gas's asset quality and transformation results. Currently, the company's PB valuation is at a historically low level, and its real value is clearly underestimated.

Stable shareholder returns, on the other hand, further highlight the long-term allocation value of Tianlun Gas. The company's core profit for the first half of 2026 was 97 million yuan, and the board of directors recommended an interim dividend of RMB 3.48 per share, corresponding to a dividend of 35.0% on the core profit, demonstrating the firm determination of the company to continue to give back to shareholders.

Furthermore, since 2026, Tianlun Gas has continued to carry out share repurchases in the HK$2.8-3.4 range. A total of 6.615 million shares have been repurchased, costing nearly HK$20 million, and all of them have been cancelled. Management continues to recycle chips at a low level with “real money”. This is not only an active correction of the company's internal value being significantly undervalued, but also a firm endorsement of a steady recovery in future fundamentals.