Event: PetroChina Capital achieved operating income of 13.9 billion yuan in the first half of 2017, basically the same as the same period last year; realized net profit of 3.6 billion yuan, an increase of 19% over the same period last year (adjusted according to restructuring in the same period last year); and by the end of June 2017, the company's assets reached 786.6 billion yuan, basically the same as at the beginning of the year. The core marginal changes of the company include: (1) smooth asset restructuring during the reporting period, build a full-license financial control platform; (2) CNPC Finance has declined in the process of actively laying out the related business of "Belt and Road Initiative" (the net profit has dropped by 15% compared with the same period last year); (3) the gross profit margin of Kunlun Bank has risen sharply by 7% compared with the same period last year; (4) increased financial leasing sector performance release (net profit up 20% year-on-year).
Asset restructuring landed, and the financial control platform started smoothly. During the reporting period, the company completed its asset restructuring and raised 12 billion yuan to inject into its subsidiaries. After the asset restructuring, the company successfully transformed the financial control platform by the power equipment R & D and manufacturing enterprises. at present, the business plate includes banks, financial companies, financial leasing, trust, insurance, insurance brokerage, securities and credit enhancement.
The net profit of the company included in the consolidated statement turned into profit compared with the same period last year. Even if the profit for the same period last year is calculated according to the restructuring adjustment (3 billion yuan), the net profit during the reporting period still increased by 19% compared with the same period last year.
CNPC Financial Services Group, financing support Belt and Road Initiative. CNPC Finance had assets of 412.5 billion yuan at the end of June 2017, and total operating income in the first half of the year reached 7.2 billion yuan (up 7% from the same period last year), accounting for 52% of PetroChina's total revenue and still the largest part of PetroChina's capital-controlled territory. The subsidiary made a net profit of 3.8 billion yuan in the first half of 2017, down 15% from a year earlier, mainly due to rising costs in business expansion. By the end of June 2017, CNPC had a total of 11 "Belt and Road Initiative"
Financing services were provided for 52 key projects of 26 member enterprises in countries and regions along the route, fully supporting Petrochina Company Limited Group's participation in the implementation of the "Belt and Road Initiative" strategy.
Kunlun Bank is actively expanding its overseas business. In the first half of 2017, the company's banking business achieved operating income of 4.7 billion yuan, down 3% from the same period last year, but the gross profit margin rose 7 percentage points so that the net profit still reached 1.7 billion yuan, accounting for 24% of PetroChina's net profit.
Kunlun Bank carries out international business around Petrochina Company Limited's overseas investment and launched the international settlement service of overseas energy cooperation zone, which has formed a brand effect and unique competitive advantage in Iran. During the reporting period, CNPC and other shareholders will increase the capital of Kunlun Bank by 7.6 billion yuan, and more sufficient capital will help Kunlun Bank to continue to operate around the energy industry chain and overseas markets, and further open the market in energy-rich countries.
Capital replenishment promotes the continuous improvement of Kunlun leasing performance. In the first half of 2017, Kunlun Financial Leasing achieved a net profit of 440 million yuan, an increase of 20% over the same period last year. We believe that the injection of 2 billion capital during the reporting period will promote the development of asset securitization business and contribute to the continued release of leasing performance.
Insurance relies on the differentiated operation of shareholders' resources. In the first half of 2017, the original insurance premium income of Zhongyi Life Insurance and Zhongyi property Insurance in the company's insurance sector reached 4.29 billion yuan and 340 million yuan respectively. Petrochina Company Limited's exclusive insurance company has made great efforts to expand its overseas business, and its scope of business has been expanded to 18 countries. PetroChina Capital's insurance shareholding companies operate differently to help the main business.
The reform of state-owned enterprises improves corporate performance. The reform of state-owned enterprises has accelerated significantly since 2017. We believe that the company is expected to give full play to its advantages of complete license and close integration of industry and finance under a more market-oriented incentive mechanism, and each business will develop in an all-round way.
Investment advice: buy-An investment rating, 6-month target price of 23 yuan. We expect the EPS of the company from 2017 to 2019 to be 0.80,0.99 and 1.07 yuan.
Risk hints: market risk, policy risk, business risk