Company Reports

PetroChina is the listed arm of one of China's two integrated oil majors and the largest oil producer. With revenue and assets more heavily weighted toward the upstream activities, PetroChina is more sensitive to swings in the oil price than its peer, Sinopec. In addition, the firm’s downstream operations lag Sinopec, which has better scale and efficiency in the sector. However, PetroChina will benefit more in a rising oil price environment.

PetroChina’s first-quarter 2024 net profit of CNY 45.7 billion, up 5% year on year, was largely in line with our expectation. After incorporating our latest energy price assumptions, we increase our 2024-28 earnings forecasts by an average of 7%. Consequently, we raise our fair value estimate to HKD 6.80 per H-share (CNY 6.20 per A-share) from HKD 6.50 (CNY 6.10). We think PetroChina’s H-shares are currently fairly valued, and see more upside for peer, Sinopec’s H-shares. During the briefing, management emphasized that the firm will balance shareholders return and its investment needs in the long-term. In our view, this means that it is less likely that PetroChina will increase its current payout ratio of 50% significantly in the near term due to its expansion plan.

PetroChina’s 2023 net profit of CNY 161.1 billion, up 8% year on year, is within with our expectation. We keep our fair value estimate at HKD 6.50 per H-share (CNY 6.10 per A-share) after incorporating our latest energy price and foreign exchange assumptions. We think PetroChina’s H-shares are fairly valued, although the estimated 2024 dividend yield of more than 7% should support its share price.

PetroChina is the listed arm of one of China's two integrated oil majors and the largest oil producer. With revenue and assets more heavily weighted toward the upstream activities, PetroChina is more sensitive to swings in the oil price than its peer, Sinopec. In addition, the firm’s downstream operations lag Sinopec, which has better scale and efficiency in the sector. However, PetroChina will benefit more in a rising oil price environment.

H-shares of the Big Three Chinese oil and gas players outperformed the Hang Seng Index year to date. We maintain our fair value estimates for CNOOC (HKD 18.00 per H-share, CNY 16.60 per A-share); PetroChina (HKD 6.50 per H-share, CNY 6.10 per A-share); and Sinopec (HKD 5.60 per H-share, CNY 5.10 per A-share). Following the recent run-up, we think H-shares of CNOOC and PetroChina are now fairly valued, but we believe Sinopec's H-shares are still undervalued, trading at close to a 20% discount to our fair value estimate. That said, given concerns about China's slowing economy and the demand on downstream refining products, we think investors may still prefer to hold companies with direct or larger upstream exposures, such as CNOOC and PetroChina.

PetroChina is the listed arm of one of China's two integrated oil majors and the largest oil producer. With revenue and assets more heavily weighted toward the upstream activities, PetroChina is more sensitive to swings in the oil price than its peer, Sinopec. In addition, the firm’s downstream operations lag Sinopec, which has better scale and efficiency in the sector. However, PetroChina will benefit more in a rising oil price environment.

PetroChina’s cumulative nine-month net profit was up 10% year on year to CNY 131.7 billion, and beats the Refinitiv consensus. After updating our latest energy price and foreign exchange assumptions, we raise 2024-25 earnings estimates by 6%-17%. Consequently, our fair value estimate rises to HKD 6.50 per H-share (CNY 6.10 per A-share) from HKD 6.20 (CNY 5.70). We think PetroChina’s H-shares are currently undervalued, with an attractive 2024 dividend yield of more than 8%. However, CNOOC remains our top pick in the sector, given its cost efficiency and robust production growth.

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%.

PetroChina is the listed arm of one of China's two integrated oil majors and the largest oil producer. With revenue and assets more heavily weighted toward the upstream activities, PetroChina is more sensitive to swings in the oil price than its peer, Sinopec. In addition, the firm’s downstream operations lag Sinopec, which has better scale and efficiency in the sector. However, PetroChina will benefit more in a rising oil price environment.

PetroChina’s first-quarter 2023 net profit of CNY 43.6 billion, up 12% year on year, beat our expectation. We raise our fair value estimate to HKD 5.70 per H-share (CNY 4.98 per A-share) from HKD 4.80 (CNY 4.22) after incorporating our latest energy price and foreign exchange assumptions. 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.

PetroChina is the listed arm of one of China's two integrated oil majors and the largest oil producer. With revenue and assets more heavily weighted toward the upstream activities, PetroChina is more sensitive to swings in the oil price than its peer, Sinopec. In addition, the firm’s downstream operations lag Sinopec, which has better scale and efficiency in the sector. However, PetroChina will benefit more in a rising oil price environment.

PetroChina’s 2022 net profit of CNY 149.4 billion, up 62% year on year, is in line with its preliminary guidance. We cut our fair value estimate to HKD 4.80 per H-share (CNY 4.22 per A-share) from HKD 4.92 (CNY 4.28) after incorporating our latest energy price and foreign exchange assumptions. We think PetroChina’s H-shares are currently fairly valued, although the estimated 2023 dividend yield of about 8% should continue to support share prices. CNOOC remains our top pick in the sector given its cost efficiency and oil and gas output growth, while its H-shares also provide more than 8% estimated dividend yield in 2023.

PetroChina is the listed arm of one of China's two integrated oil majors and the largest oil producer. With revenue and assets more heavily weighted toward the upstream activities, PetroChina is more sensitive to swings in the oil price than its peer, Sinopec. In addition, the firm’s downstream operations lag Sinopec, which has better scale and efficiency in the sector. However, PetroChina will benefit more in a rising oil price environment.

We maintain our fair value estimates for: CNOOC (HKD 17.50 per H-share, CNY 15.30 per A-share); PetroChina (HKD 4.92 per H-share, CNY 4.28 per A-share); and Sinopec (HKD 5.50 per H-share, CNY 4.76 per A-share). Both CNOOC and PetroChina guided strong preliminary 2022 net profit that beat market expectations. Meanwhile, although Sinopec has yet to provide preliminary 2022 net profit, we note that the firm’s 2022 operating statistics are largely in line with our expectations. We will provide more updates pending the announcements of their final results in March.

PetroChina is the listed arm of one of China's two integrated oil majors and the largest oil producer. With revenue and assets more heavily weighted toward the upstream activities, PetroChina is more sensitive to swings in the oil price than its peer, Sinopec. In addition, the firm’s downstream operations lag Sinopec, which has better scale and efficiency in the sector. However, PetroChina will benefit more in a rising oil price environment.

PetroChina’s cumulative nine months' 2022 net profit was CNY 120.3 billion, up 60.1% year on year and beats FactSet's consensus estimate, likely due to robust earnings from the upstream segment. We keep PetroChina’s fair value estimate at HKD 4.92 per H-share (CNY 4.28 per A-share), after updating our energy price and foreign exchange assumptions. We think PetroChina’s H-shares are undervalued, but we prefer CNOOC as our top pick in the sector given its upstream focus (a direct beneficiary of higher oil prices) and attractive risk/reward.

PetroChina’s first-half 2022 net profit of CNY 82.4 billion, up 55% year on year, was in line with its profit alert issued July 2022. Higher energy prices, effective cost controls and inventory gains drove earnings up. We raise PetroChina’s fair value estimate to HKD 4.92 per H-share (CNY 4.28 per A-share) from HKD 4.60 (CNY 3.72), after updating our energy price and foreign exchange assumptions. We reduce our Morningstar Uncertainty Rating to High from Very High as we see energy prices staying at levels that support PetroChina’s earnings. We think PetroChina’s H-shares are undervalued but our preferred pick for the sector is CNOOC, given its upstream focus and cost efficiency.

PetroChina is the listed arm of one of China's two integrated oil majors and the largest oil producer. With revenue and assets more heavily weighted toward the upstream activities, PetroChina is more sensitive to swings in the oil price than its peer, Sinopec. In addition, the firm’s downstream operations lag Sinopec, which has better scale and efficiency in the sector. However, PetroChina will benefit more in a rising oil price environment.

We cease coverage of PetroChina and Sinopec American depositary shares, or ADS, following their plans to voluntarily delist from the New York Stock Exchange. We keep our respective fair value estimates of HKD 4.60 per H-share (CNY 3.72 per A-share) and HKD 5.40 per H-share (CNY 4.40 per A-share) for PetroChina and Sinopec unchanged. While the delisting of the ADS may exert near-term pressure on share price performance, we believe it will have limited impact on the operations or the underlying values of PetroChina and Sinopec, as they can still raise equity fundings from the Stock Exchange of Hong Kong and the Shanghai Stock Exchange if necessary.

CNOOC guided that first-half 2022 earnings will increase significantly by 112% to 118% year on year to CNY 70.5 billion to CNY 72.5 billion, mainly attributable to stronger oil prices, robust production growth, and efficient cost control. We think this has been largely expected by the market.