PetroChina Earnings: Robust Upstream Division; Downstream Segments Outperform Peers

PetroChina’s first-half 2023 net profit of CNY 85.3 billion, up 4% year on year, beat our expectation. After incorporating our latest energy price and foreign exchange assumptions, our earnings estimates for 2023-25 increase by 12%-39%, and we raise our fair value estimate to HKD 6.20 per H-share (CNY 5.70 per A-share) from HKD 5.70 (CNY 4.98). We think PetroChina’s H-shares are currently fairly valued, although the estimated 2023 dividend yield of about 8% should continue to support its share price. Operating cash flow increased 13% year on year to CNY 221.7 billion and we think this indicates upside to our 2023 estimated payout ratio of 50%.