Brief performance review
The company released its 2023 annual report on March 25, 2024. The full year of 2023 achieved operating income of 3011.012 billion yuan, a year-on-year decrease of 7.04%; realized net profit of 161,146 billion yuan, an increase of 8.34% over the previous year. Among them, 2023Q4 achieved operating income of 728.877 billion yuan, a year-on-year decrease of 7.00%, and realized net profit to mother of 29.495 billion yuan, an increase of 1.33% over the previous year. The company's performance continued to grow against the trend under the influence of the 17.02% year-on-year drop in oil prices throughout the year and the large share payment of mining rights concessions in Q4, further reflecting the results of central enterprise reforms, which greatly exceeded expectations.
Management analysis
Upstream oil and gas production has both increased, and central enterprise reforms have continued to shine brightly: marginal supply increases in key oil-producing countries are limited. As global travel intensity continues to recover, demand for crude oil consumption gradually picks up, and oil prices are expected to continue to fluctuate at medium to high levels. The company's exploration and development capital expenditure reached 248.378 billion yuan in 2023, an increase of 12.09% over the previous year, and continued to remain at a high level.
In 2023, the company's crude oil production reached 937 million barrels, up 3.41% year on year; natural gas production reached 4.93 trillion cubic feet, up 4.26% year on year. The company plans to produce 909 million barrels of crude oil and 514 trillion cubic feet of natural gas in 2024. The exploration and development sector is expected to rise steadily. In addition, the company's taxes other than income tax in 2023 were 296.226 billion yuan, an increase of 18.171 billion yuan compared with 2022, of which additional revenue from mining rights concessions was 23.685 billion yuan.
Sales of refined oil products have increased, and the medium to high boom is expected to continue: the profitability of the company's refined oil sales segment continues to be steady. The gross margin of the sales segment in 2023 was 3.51%, -0.20pct year on year. The sales volume of diesel/gasoline/kerosene for the full year of 2023 was 79.7 million tons/67.14 million tons/18.96 million tons, an increase of 1.19%/15.34%/38.64% year-on-year. At the same time, the domestic gasoline and diesel wholesale price gap continues to be steady, and the high level of prosperity in the refined oil sales sector is expected to continue.
High dividend payment rates continue to return shareholders: The company adheres to a high dividend policy, and shareholders have a rich return on investment. The company's 2023 cash dividend totaled RMB 80.529 billion, and the company's dividend payment rate reached 49.97%. At the same time, the company's dividend ratio remained at a high level. Based on the closing price on December 31, 2023, the company's dividend rate was 6.23%, including the final 2023 cash dividend of 0.21 yuan per share and the semi-annual cash dividend of 0.23 yuan per share. The company's shareholders had a good return on investment.
Profit Forecasts, Valuations, and Ratings
We believe that in the context of central enterprise reform, the improvement of the company's operating indicators can partially hedge against negative fluctuations in crude oil prices, and the company's core competitiveness will continue to be reflected. We expect the company's net profit to be 181.1 billion yuan/191.8 billion yuan/2010 billion yuan in 2024-2026, corresponding EPS is 0.99 yuan/1.05 yuan/1.10 yuan, and the corresponding PE is 9.38X/8.85X/8.45X, maintaining a “buy” rating.
Risk warning
(1) Oil and gas field commissioning progress falls short of expectations; (2) risk of oil product price liberalization; (3) risk of slump in terminal demand; (4) impact of tripartite data errors; (5) overseas business risk (6) exchange rate risk.