Company Reports

China Petroleum & Chemical, better known as Sinopec, is the listed arm of one of China's two integrated oil majors and one of Asia's largest refiners and chemical companies in terms of revenue. Owing in part to historical legacy, Sinopec’s revenue and assets are more heavily weighted toward its downstream activities, and the company relies on external sources of oil to meet its refining and processing needs. As a result, Sinopec’s earnings are generally less sensitive to oil prices swings than peer PetroChina's, and so it benefits less in a rising oil price environment but is also more stable when prices fall.

Sinopec’s first-quarter net profit of CNY 18.7 billion, down 10% year on year, was slightly better than we expected, on the back of firm upstream earnings, which partly mitigate the weaker performance from the refining and chemicals segments. After updating our latest energy price assumptions, we lift our 2024-26 earnings forecasts by 1%-4%. Consequently, we raise our fair value estimate to HKD 5.90 per H-share (CNY 5.40 per A-share) from HKD 5.60 (CNY 5.10). We think Sinopec’s H-shares are undervalued, underpinned by the attractive 2024 dividend yield of around 8% and ongoing share buyback plan. We believe Sinopec will continue to focus on shareholder return but we expect upside to the dividend payout ratio to be limited, as our forecast of 70% for 2024 is already higher than peers’ 45%-50%.

China Petroleum & Chemical, better known as Sinopec, is the listed arm of one of China's two integrated oil majors and one of Asia's largest refiners and chemical companies in terms of revenue. Owing in part to historical legacy, Sinopec’s revenue and assets are more heavily weighted toward its downstream activities, and the company relies on external sources of oil to meet its refining and processing needs. As a result, Sinopec’s earnings are generally less sensitive to oil prices swings than peer PetroChina's, and so it benefits less in a rising oil price environment but is also more stable when prices fall.

Sinopec’s 2023 net profit of CNY 58.3 billion, down 13% year on year, was below our expectation, largely due to impairment losses and a one-off levy for mineral rights concessions of CNY 7.4 billion. Meanwhile, operating statistics for 2023 including oil and gas output, refinery throughput, ethylene production, and domestic sales volume of refined oil products were in line with our expectations. We maintain our fair value estimate of HKD 5.60 per H-share (CNY 5.10 per A-share) after considering our latest energy price and foreign exchange assumptions. We think Sinopec’s H-shares are currently undervalued, supported by its attractive 2024 dividend yield of more than 8%.

China Petroleum & Chemical, better known as Sinopec, is the listed arm of one of China's two integrated oil majors and one of Asia's largest refiners and chemical companies in terms of revenue. Owing in part to historical legacy, Sinopec’s revenue and assets are more heavily weighted toward its downstream activities, and the company relies on external sources of oil to meet its refining and processing needs. As a result, Sinopec’s earnings are generally less sensitive to oil prices swings than peer PetroChina's, and so it benefits less in a rising oil price environment but is also more stable when prices fall.

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.

Sinopec’s cumulative nine months' 2023 net profit of CNY 54.1 billion was 7% lower year on year, broadly in line with the Refinitiv consensus but below our expectations. We lower our 2023 net profit forecast by 12% to factor in the slower-than-expected recovery in refining earnings, but our longer-term estimates are largely unchanged. We keep our fair value estimate at HKD 5.60 per H-share (CNY 5.10 per A-share), after considering our latest energy price and foreign exchange assumptions. We think Sinopec’s H-shares are currently undervalued, and the estimated 2024 dividend yield of more than 10% and ongoing share buyback should continue to support share prices. However, CNOOC remains our top pick in the sector, given its cost efficiency and robust production growth.

China Petroleum & Chemical, better known as Sinopec, is the listed arm of one of China's two integrated oil majors and one of Asia's largest refiners and chemical companies in terms of revenue. Owing in part to historical legacy, Sinopec’s revenue and assets are more heavily weighted toward its downstream activities, and the company relies on external sources of oil to meet its refining and processing needs. As a result, Sinopec’s earnings are generally less sensitive to oil prices swings than peer PetroChina's, and so it benefits less in a rising oil price environment but is also more stable when prices fall.

China Petroleum & Chemical Corp’s, or Sinopec’s, first-half 2023 net profit of CNY 36.1 billion was down 19% year on year, broadly in line with our expectation, with resilient upstream income offset by weak refining and chemicals earnings. After considering our latest energy price and foreign exchange assumptions, we increase our 2023-25 earnings estimates by 3%-13% and raise our fair value estimate to HKD 5.60 per H-share (CNY 5.10 per A-share) from HKD 5.50 (CNY 4.84). We think Sinopec’s H-shares are currently undervalued, and the estimated 2023 dividend yield of more than 10% and share buyback plan should support share prices. That said, concerns about downstream demand due to China’s slowing economic growth could weigh on its share price performance in the near term.

China Petroleum & Chemical, better known as Sinopec, is the listed arm of one of China's two integrated oil majors and one of Asia's largest refiners and chemical companies in terms of revenue. Owing in part to historical legacy, Sinopec’s revenue and assets are more heavily weighted toward its downstream activities, and the company relies on external sources of oil to meet its refining and processing needs. As a result, Sinopec’s earnings are generally less sensitive to oil prices swings than peer PetroChina's, and so it benefits less in a rising oil price environment but is also more stable when prices fall.

China Petroleum & Chemical Corp’s, or Sinopec’s, first-quarter 2023 net profit of CNY 20.7 billion was down 12% year on year, better than our expectation on the back of firm upstream earnings and recovery in its refining and marketing segments. After taking into account our latest energy price and foreign exchange assumptions, we raise our fair value estimate to HKD 5.50 per H-share (CNY 4.84 per A-share) from HKD 5.00 (CNY 4.40). We think Sinopec’s H-shares are currently fairly valued, with positive downstream recovery largely priced in. However, attractive 2023 dividend yield of more than 8% and the company’s share buyback plan should continue to support share prices.

China Petroleum & Chemical, better known as Sinopec, is the listed arm of one of China's two integrated oil majors and one of Asia's largest refiners and chemical companies in terms of revenue. Owing in part to historical legacy, Sinopec’s revenue and assets are more heavily weighted toward its downstream activities, and the company relies on external sources of oil to meet its refining and processing needs. As a result, Sinopec’s earnings are generally less sensitive to oil prices swings than peer PetroChina's, and so it benefits less in a rising oil price environment but is also more stable when prices fall.

China Petroleum & Chemical Corp.'s, or Sinopec’s, 2022 net profit of CNY 66.2 billion, down 8% year on year, was below our expectation, largely due to weak refining and chemicals earnings, partly offset by a CNY 13.7 billion gain from disposal of Shanghai SECCO. We cut fair value estimate to HKD 5.00 per H-share (CNY 4.40 per A-share) from HKD 5.50 (CNY 4.76) after taking into account our latest energy price and foreign exchange assumptions. We think Sinopec’s H-shares are currently fairly valued, while the attractive 2023 dividend yield of more than 8% and the company’s shares buyback plan should continue to support share prices.

China Petroleum & Chemical, better known as Sinopec, is the listed arm of one of China's two integrated oil majors and one of Asia's largest refiners and chemical companies in terms of revenue. Owing in part to historical legacy, Sinopec’s revenue and assets are more heavily weighted toward its downstream activities, and the company relies on external sources of oil to meet its refining and processing needs. As a result, Sinopec’s earnings are generally less sensitive to oil prices swings than peer PetroChina's, and so it benefits less in a rising oil price environment but is also more stable when prices fall.

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.

Sinopec’s cumulative nine months 2022 net profit of CNY 57.3 billion was 5.9% lower year on year. The results were within our expectations, with strong upstream earnings offset by weaker downstream performance. We keep our fair value estimate at HKD 5.50 per H-share (CNY 4.76 per A-share), after taking into account our latest energy price and foreign exchange assumptions. We think Sinopec’s H-shares are currently undervalued, but we favor CNOOC given its upstream focus amid high oil prices, cost efficiency and robust production growth.

China Petroleum & Chemical, better known as Sinopec, is the listed arm of one of China's two integrated oil majors and one of Asia's largest refiners and chemical companies in terms of revenue. Owing in part to historical legacy, Sinopec’s revenue and assets are more heavily weighted toward its downstream activities and the company relies on external sources of oil to meet its refining and processing needs. As a result, Sinopec’s earnings are generally less sensitive to oil prices swings than peer PetroChina's, and so it benefits less in a rising oil price environment but is also more stable when prices fall.

Sinopec’s first-half 2022 net profit of CNY 44.5 billion, up 10.5% year on year, slightly beat our expectations due to strong upstream earnings that helped to offset weaker downstream performance. We raise Sinopec’s fair value estimate to HKD 5.50 per H-share (CNY 4.76 per A-share) from HKD 5.40 (CNY 4.40), 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 Sinopec’s earnings. We think Sinopec is currently undervalued, but the weaker downstream earnings could continue to weigh on its share price performance in the near term. Our preferred pick for the sector is CNOOC, given its upstream focus and cost efficiency.

China Petroleum & Chemical, better known as Sinopec, is the listed arm of one of China's two integrated oil majors and one of Asia's largest refiners and chemical companies in terms of revenue. Owing in part to historical legacy, Sinopec’s revenue and assets are more heavily weighted toward its downstream activities and the company relies on external sources of oil to meet its refining and processing needs. As a result, Sinopec’s earnings are generally less sensitive to oil prices swings than peer PetroChina's, and so it benefits less in a rising oil price environment but is also more stable when prices fall.

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.