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China Petroleum & Chemical Corp SNP

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Sinopec’s Q1 2021 Results Underpinned by Strong Recovery in All Segments; Shares Attractive

Chokwai Lee, CFA Senior Equity Analyst

Analyst Note

| Chokwai Lee, CFA |

China Petroleum & Chemical Corp’s, or Sinopec’s, first-quarter 2021 net profit of CNY 18.5 billion was a significant improvement from a net loss of CNY 19.2 billion, a year ago. This is slightly better than the earnings guidance of between CNY 16 billion and CNY 18 billion, mainly attributable to strong demand for its products given recovering domestic economic activities, as well as better cost management. We raise our fair value estimate to HKD 5.90 per H-share (USD 75 per ADR, CNY 4.92 per A-share) from HKD 5.60 (USD 72, CNY 4.70) after taking into account the stronger results. We think Sinopec’s current share price is attractive on the back of firm oil prices and recovering downstream earnings. Management intends to keep dividend policy stable, and we believe our 70% payout ratio estimate is achievable, translating to a yield of about 10% for the H-shares in 2021.

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Company Profile

Business Description

China Petroleum & Chemical, or Sinopec, is one of China's national oil companies and one of Asian's largest integrated oil companies in terms of revenue. Its income is derived primarily from refining and marketing of oil products and petrochemical production. Sinopec has China's largest petrol station network with over 30,000 stations and enjoys significant market share in petrochemicals. Established in 2000 by China Petrochemical Corporation, a state-owned enterprise and majority shareholder, the company also owns oil and gas assets in Shandong and Sichuan provinces. It has a smaller global upstream presence than peers PetroChina and CNOOC.

Contact
No. 22 Chaoyangmen North Street, Chaoyang District
Beijing, 100728, China, People's Republic of
T +86 1059960028
Sector Energy
Industry Oil & Gas Integrated
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type —
Employees 384,065

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