Event: CNPC achieved operating income of 28.8 billion yuan (YoY-6%) in 2016, net profit of 5.5 billion yuan (YoY-8%) for parent company, and operating income of 6.7 billion yuan (YoY-3%) for the first quarter of 2017, with net profit of 1.4 billion yuan (YoY + 3%) for parent company. The weighted average ROE of the company in 2016 was 10.7%. The weighted average ROE of the company in the first quarter of 2017 was 2.1%.
Take off the star and hat to incarnate financial control, and broaden the financing channels. In the first quarter of 2017, the company completed the major asset exchange and issued shares, paid cash to buy assets and raised matching funds and related transactions, excluding the cash consideration for the assets placed in the company, raised 12 billion yuan to inject supporting funds into subsidiaries. The company finally changed its name from "* ST Jichai" to "PetroChina Capital" and removed the hint of "* ST". From the power equipment R & D and manufacturing enterprise incarnated into a financial control platform integrating banks, financial companies, financial leasing, trust, insurance, insurance brokerage, securities and credit promotion. On the one hand, financial subsidiaries with relatively weak financing capacity can broaden their financing channels with the help of the platform of listed companies, so as to expand their business and improve their anti-risk ability. on the other hand, it can strengthen the capital operation platform of "combination of industry and finance" and "financial coordination" to enhance the overall competitiveness.
The advantage of complete license plate is obvious, which will help the performance increase.
(1) CNPC Financial Services Group with sound performance. CNPC Finance mainly provides all kinds of investment, financing and financial services to the member units of the group, and its operating income remains sound. In 2016, the company's financial business achieved an operating income of 13.5 billion yuan (YoY + 3%). CNPC Finance's largest source of income is the credit business, and as the net interest margin stabilizes and picks up, the net profit returned to the parent company in 2017 is expected to maintain a growth rate of about 5%.
(2) Kunlun Bank develops the combination of industry and finance around the main oil industry. In 2016, the company's banking business achieved an operating income of 9.4 billion yuan (YoY-19%).
According to the company's announcement that Kunlun Bank will continue to conduct business around the energy industry chain and overseas energy markets in the next five years, Kunlun Bank has completed a fixed increase of 7.6 billion yuan from shareholders such as PetroChina Capital, which is expected to guarantee business development and capital adequacy planning for two to three years. With the supply-side reform and the promotion of the "Belt and Road Initiative" policy, the repricing of superimposed loans recedes and the market interest rate rises marginally, and the performance of Kunlun Bank is expected to pick up.
(3) Financial leasing is supported by a fixed increase. In 2016, the company's financial leasing business achieved operating income of 2.7 billion yuan (YoY-14%), and the injection of an additional 2 billion yuan (of which CNPC Capital increased by 1.2 billion yuan) will promote the asset securitization business and the construction of professional subsidiaries, and the performance is expected to improve.
(4) strengthening the transformation of trust business. CNPC Asset, a subsidiary of the company, has a limited stake of 82% in Kunlun Trust and 25% in Shandong Trust. In 2016, the company's trust business achieved an operating income of 1.5 billion yuan (YoY + 48%), with a significant increase in net profit margin. Among them, Kunlun Trust will strengthen business transformation and the combination of industry and finance with the help of the 7.2 billion yuan raised by Dingzeng (of which CNPC Capital will increase its capital by 5.9 billion yuan), so as to enhance its active management ability and its ability to serve the real economy.
(5) differential operation of the insurance sector to help the main business. ① Petrochina Company Limited exclusive Insurance Company is the first self-insurance company in China, with a premium income of 380 million yuan (YoY-6%) in 2016. the continuous development of the company's new types of insurance and the unified insurance scheme for large stations, large warehouses and gathering and transportation networks will help to maintain a high growth rate of premium income, which is expected to reach about 450 million yuan in 2017. ② Kunlun insurance broker relies on Petrochina Company Limited's main business and has good profitability. It achieved a net profit of 110 million yuan (YoY + 3%) returned to its parent company in 2016. Kunlun insurance broker business model is mature and is expected to maintain rapid growth in the future. ③ China Italian Life achieved a premium income of 9.7 billion yuan (YoY + 5%) in 2016, maintained its market share at 8%, and is expected to make a net profit of 500 million yuan to the parent company in 2017. Affected by the change in the exchange rate of the euro and the development of auto insurance business, ④ lost 30 million yuan in net profit to the parent company in 2016. as the impact of fixed fees is diluted, it is expected to break even in 2017.
Mixed reform of state-owned enterprises to improve quality and increase efficiency. The reform of mixed ownership of state-owned enterprises is one of the priorities of the government's work in 2017. In December 2016 and February 2017, Petrochina Company Limited Group successively adopted a number of reform plans, such as "guiding opinions on Market-oriented Reform of Group companies", "opinions on mixed ownership Reform of Group companies" and "key points of Comprehensive deepening Reform of Group companies in 2017". On the one hand, the reorganization and listing of PetroChina Capital is an important step in the mixed ownership reform of Petrochina Company Limited Group, which is expected to improve the company's operating efficiency; on the other hand, there are many business synergies between the company's financial institutions and Petrochina Company Limited Group. The overall reform of the group will help to improve the company's operating performance.
Investment advice: buy-An investment rating, 6-month target price of 23 yuan. We estimate that the EPS of the company from 2017 to 2019 is 0.69 yuan, 0.82 yuan and 0.86 yuan.
Risk hints: a sharp decline in macro-economy, stricter policy supervision, less than expected business coordination, and overseas business risks.