Helium Prices Stabilize; HGT Valuation Fully Reflected, Downgraded

Overview

This research report focuses on the Chinese electronic speciality gases sector, with a core conclusion being differentiated rating adjustments for two leading companies. UBS believes that despite geopolitical factors causing volatile helium prices in the first half of the year, prices will stabilize rather than continue to surge dramatically in the second half due to increased Russian supply. Based on this, Hwa Tung Gas's stock price has fully reflected helium price hikes and performance growth expectations, making it expensive in valuation terms, hence the downgrade to Neutral. In contrast, Guanggang Gas maintains attractive valuations due to increasing market share in the memory chip sector and new project awards, retaining a Buy rating.

Core views

Helium Price Outlook: The report expects domestic retail helium prices to stabilize in the CNY 200-300 per cubic meter range during the second half of 2026. Although Qatar facility outages and issues with the Strait of Hormuz passage persist, the Russian Amur Phase II capacity has begun ramping up, and global helium market fundamentals are looser than in 2022, limiting further significant upward price pressure. Meanwhile, due to rigid downstream demand and slowing declines in trader quotations, prices are unlikely to fall back below CNY 100 per cubic meter. Hwa Tung Gas (Downgraded to Neutral): Although the company's net profit compound annual growth rate (CAGR) is projected to reach 39% from 2026-2028, and its electronic speciality gases business benefits from the recovery in the storage cycle, the current stock price implies a 2027 estimated P/E ratio of 73x, higher than the industry average of 70x. The report argues that the market has fully priced in the positive impact of helium price hikes and the company's growth prospects. Coupled with 2026 guidance falling short of expectations, there are few near-term catalysts for further upside. However, considering long-term domestic substitution trends, the target price is significantly raised from CNY 93 to CNY 200. Guanggang Gas (Maintain Buy): The report is bullish on its elasticity during the memory chip upcycle, projecting a net profit CAGR of up to 52% from 2026-2028. The company secured bids for multiple electronic bulk gas on-site production projects in 2024-2025 and holds a 41% share in bidding for new projects by domestic storage enterprises, which will translate into substantial revenue over the coming years. While concerns exist regarding helium long-term agreements affected by geopolitics, the report believes its multi-channel sourcing capabilities can guarantee supply. Currently, its 2027 estimated P/E is 55x, lower than the industry average, leaving room for valuation expansion, and the target price is raised from CNY 29 to CNY 42.

Analysis framework

The report adopts a dual analysis framework combining "macro commodity price forecasting" and "micro company valuation comparison." First, by analyzing the global helium supply-demand balance sheet (particularly supply variables from Russia and Qatar), it assesses raw material cost trends and corrects the market's linear extrapolation expectation of continuously surging helium prices. Second, at the individual stock level, it uses PEG and forward P/E comparison methods to test the matching between a company's earnings growth (CAGR) and its current valuation multiple. For Hwa Tung Gas, while acknowledging its high growth, it points out that the valuation premium exceeds the growth advantage. For Guanggang Gas, it emphasizes that the earnings certainty derived from order visibility is sufficient to support current valuations and command a premium. This analytical approach helps investors distinguish between "good companies" and "good prices."

Methodology notes

• Valuation MethodPE/PEG valuation

  Analysis of alignment between forward P/E and earnings growth

  The report looks beyond static P/E levels and combines the 2027 estimated P/E with the 2026-2028 net profit CAGR (i.e., PEG logic). When a company's P/E multiple is significantly higher than peers and approaches or exceeds its growth rate (e.g., Hwa Tung Gas 73x PE vs. 39% CAGR), it is considered to have valuations fully reflecting positive news. Conversely, if the P/E is below peers and growth is faster (e.g., Guanggang Gas 55x PE vs. 52% CAGR), it is considered undervalued.

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Supply-demand rebalancing logic driven by events

  For niche, highly concentrated commodities like helium, the report states that price fluctuations are primarily driven by sudden supply interruptions (event-driven) rather than gradual supply-demand evolution. However, when judging price sustainability, one must return to the pace of global capacity deployment (e.g., Russian Amur Phase II) and historical inventory levels to identify the true price center after sentiment premiums dissipate.

• Cycle and Health FrameworkCycle Tipping Point Analysis

  Transmission effect of semiconductor storage cycles on upstream materials

  The report anchors the improvement in electronic speciality gas demand to the supply-demand gap in DRAM/NAND memory chips. As AI drives demand for DDR5 and HBM, recovery in memory fab utilization rates directly increases the usage of upstream speciality and bulk gases. This is the core leading indicator for determining the mid-term performance turning point for related companies.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Hwa Tung Gas (688268.SS)

  Rating downgraded to Neutral: Although benefiting from the storage cycle, the stock price has already fully priced in helium price hikes and growth expectations

  Strengths

  Diverse electronic speciality gas product lines, smooth overseas supply chain expansion, helium exposure exceeds 10%

  Weaknesses

  2026 performance guidance below expectations, industrial gas project depreciation dragging profits, valuation higher than peers

  Comparison

  2027E PE 73x vs. Guanggang Gas 55x; Net profit CAGR 39% vs. Guanggang Gas 52%

  Risks

  Intensifying competition in fluorocarbon gases leading to margin decline, semiconductor geopolitical risks, overseas verification progress below expectations

• Guanggang Gas (688548.SS)

  Maintain Buy: Storage cycle upturn combined with放量 of newly awarded projects, valuation still below industry average

  Strengths

  Leader in on-site gas production for domestic storage plants, high customer stickiness, the only domestic enterprise to sign a Qatar helium long-term agreement

  Weaknesses

  Rising helium procurement costs may compress margins, bulk gas business affected by uncertainty in merger and integration

  Comparison

  2027E PEG 1.7x vs. domestic peer average 3.2x, offering valuation cost-effectiveness

  Risks

  Severe volatility in helium prices, geopolitical impact on long-term agreement execution, delayed capacity ramp-up by downstream customers

Key data

• H2'26 Helium Price ForecastCNY 200-300 per cubic meterDeclined from peak of CNY 500 within the year, but higher than January's CNY 90 level
• Hwa Tung Gas 2027E PE73xHigher than the industry average of 70x for electronic speciality gases
• Guanggang Gas 2026-28E Net Profit CAGR52%Significantly higher than Hwa Tung Gas's 39% and the industry average of 30%
• Hwa Tung Gas 2026E Earnings AdjustmentDecreased 17%Due to company guidance falling short of expectations and industrial gas depreciation dragging profits
• Guanggang Gas IC On-site Production Bid Share41%Share of new domestic projects in 2024, reflecting competitive advantage

Impact & implications

For the electronic speciality gases sector, the report's judgment implies that investment logic is shifting from purely a "helium price hike theme" to a screening stage focused on "performance realization and valuation matching." The stabilization of helium prices helps eliminate anxiety among downstream customers but also means the window for capturing excess profits through spreads is narrowing. Future divergence within the sector will become more pronounced: companies with long-term order lock-in capabilities and higher domestic substitution penetration rates (like Guanggang Gas) will receive valuation premiums, while targets relying solely on short-term price elasticity will face pressure for valuation normalization.

Risks

• Geopolitical events interfere with the development of the domestic semiconductor industry chain
• Downstream demand heavily relies on the overall process of semiconductor domestic substitution
• Technology iteration leads to substitution of specific electronic speciality gas varieties
• High-GWP products such as fluorocarbons face environmental policy risks
• Severe volatility in helium and other rare gas prices affects profitability stability

What to watch

• Helium supply dynamics in high-consumption regions such as Japan, South Korea, and Europe
• Actual ramp-up speed of Russian Amur Phase II capacity
• Resumption of Qatar helium facilities and navigation status of the Strait of Hormuz
• Progress of Hwa Tung Gas overseas wafer fab product verification
• Revenue recognition rhythm of Guanggang Gas's newly awarded projects