ENN Natural Gas (600803.SS) Strong 3Q26 Operating Profit with More from Direct Gas Sales; Beneficiary of High Global LNG Prices

ENN Natural Gas hosted its post 3Q26 result call this morning. The company's net profit fell 22.9% yoy to Rmb785m in 3Q26 mainly owing to Rmb183m fair value loss (vs. Rmb21m fair value gain in 3Q25), and its net profit was reduced Rmb554m or 16.2% yoy to Rmb2,874m in 9M26 for the same reason. We nevertheless do not expect its net profit to drop yoy in 2026E as Rmb1.5bn disposal gain would be booked in 4Q26E from the sales of gas pipelines related to Zhoushan LNG terminal. ENN NG's operating profit rose 23.7% yoy to Rmb2,925m in 3Q26 with more from direct gas sales. Its profit from direct gas sales rose over 80% yoy to Rmb2,234m in 9M26 mainly for expanded dollar margin, which expanded from Rmb0.36/m3 in 9M25 to Rmb0.68/m3 in 9M26, comprising Rmb0.35/m3 from domestic and Rmb1.06/m3 from overseas. We reiterate our Buy rating on ENN NG and keep it as our top pick in China's gas sector expecting it to benefit from global high LNG prices.