Key points of investment:
Company announcement: In 2023, the company achieved operating income of 3011 billion yuan, down 7% year on year; net profit to mother was 161.1 billion yuan, up 8% year on year; net profit after deducted from mother was about 187.1 billion yuan, up 10% year on year. Among them, Q4 achieved operating income of 728.9 billion yuan, a decrease of 9% from the previous month; net profit due to mother was about 29.5 billion yuan, down 36% from the previous month; and realized net profit without deduction of about 52.6 billion yuan, an increase of 11% over the previous month. The company paid a total of 23.7 billion dollars in mining rights concessions in 2023, and the performance was in line with our expectations.
Oil and gas production has reached a record high, and upstream profits are expected to remain at a high level. In 2023, the company's oil and gas production reached 1,759 million barrels of oil equivalent, up 4.4% year on year, of which crude oil production was 937 million barrels, up 3.4% year on year; saleable natural gas production was 4932.4 billion cubic feet, up 5.5% year on year. The upstream sector achieved operating profit of 148.695 billion yuan in 2023, down 10.3% year on year, mainly due to falling oil prices. The average realized price of the company's crude oil was 76.60 US dollars/barrel, down 16.8% year on year. The company's target crude oil production in 2024 is 909 million barrels, which can sell 51,426 cubic feet of natural gas. In the future, as oil prices fluctuate, the company's upstream sector is expected to maintain a high level of profit.
The refining and chemical business recovered, and refining profits declined while the chemical industry turned losses into profits. In 2023, the company's crude oil processing load reached 85.6%, an increase of 4.7 pcts over the same period last year. A total of 1,399 billion barrels of crude oil were processed throughout the year, with a year-on-year increase of 15.3%, with a target of 1.404 billion barrels in 2024; the production of refined oil products was 123 million tons, up 16.5% year on year; and the commercial volume of chemical products was 34.38 million tons, up 8.7% year on year. In 2023, the company's refining and chemical sector achieved operating profit of RMB 36.936 billion, a year-on-year decrease of 9%. Among them, the refining business achieved operating profit of RMB 36.252 billion, a year-on-year decrease of 11.9%; the chemical business achieved operating profit of RMB 684 million, turning a year-on-year loss into a profit. It is expected that as the market recovers, the performance of the company's refining and chemical sector is expected to improve.
The refined oil market has picked up significantly, and natural gas profits are expected to continue to rise. In 2023, the company sold 166 million tons of refined oil products, up 10.1% year on year. The sales segment achieved operating profit of 23.962 billion yuan, an increase of 66.7% year on year. In 2023, the company sold 273.548 billion cubic meters of natural gas, up 5.1% year on year. The natural gas sales segment achieved operating profit of RMB 43,044 billion, an increase of 232.21% year on year. According to the latest pipeline gas price plan, domestic gas prices are expected to remain flat in 2024, but as overseas gas prices fall, the company's imported gas losses are expected to be reduced, thus driving up the performance of the natural gas sales sector.
Capital expenditure guidelines declined year on year, and dividend levels are expected to continue to rise. In 2023, the company achieved capital expenditure of 275.338 billion yuan, which is basically the same as the previous year. The company's planned capital expenditure target for 2024 was 258 billion yuan, of which upstream capital expenditure fell by 14.24%, while capital expenditure in the refining, refined oil sales, and natural gas sales sectors all increased to varying degrees. In terms of dividends, according to the company's announcement, the company distributed a total of 80.6 billion yuan in cash in 2023, with a dividend rate of 50%. It is expected that the dividend level will continue to rise in the future as performance improves and capital expenditure declines.
Investment analysis opinion: We maintain the 2024-2025 profit forecast of 1807 billion and 191.6 billion, and add the 2026 forecast to 1994 billion. The corresponding PE is 9X, 9X, and 9X respectively, maintaining the “buy” rating.
Risk warning: risk of a sharp drop in oil prices; refining and chemical recovery falling short of expectations; natural gas losses falling short of expectations, etc.