The performance was in line with expectations, and net profit, free cash flow, and dividend amounts to mother reached record highs. In 2023, the company achieved revenue of 3011 billion yuan (-7.0% YoY), net profit to mother of 161.15 billion yuan (+8.3% YoY), and achieved free cash flow of 176.12 billion yuan (+17.1% YoY). The decline in revenue was mainly due to falling oil and gas product prices. In addition, the company made impairment preparations of 28.99 billion yuan, and additional mining rights concession revenue of 23.69 billion yuan. Among them, the fourth quarter achieved revenue of 728.9 billion yuan (-7.0% YoY, -9.1% YoY) and net profit to mother of 29.50 billion yuan (+1.3% YoY, -36.4% YoY). The company's capital expenditure in 2023 is 275.34 billion yuan (+0.4% YoY), and the capital expenditure is expected to be 258 billion yuan in 2024; the company's total dividend in 2023 is 80.53 billion yuan, with a dividend rate of 50.0% and a dividend rate of 4.7% for A-shares.
Exploration and development sector: Continuously promote increased storage and production, with significant cost reduction and efficiency effects. In 2023, the company achieved oil and gas production of 1,759 billion barrels of oil equivalent (+4.4% year over year), of which crude oil production was 937 million barrels (+3.4% year over year), and saleable natural gas production was 4.93 trillion cubic feet (+5.5% year over year). In 2023, the average realized crude oil price of the company was 76.6 US dollars/barrel (-16.8% YoY), the unit oil and gas operating cost was 11.95 US dollars/barrel (-3.8% YoY), and the upstream sector achieved operating profit of 148.70 billion yuan (-10.3% YoY). The results of cost reduction and efficiency were remarkable.
Refining and chemical sector: Dynamically optimizing the product structure, turning losses into profits in the chemical business. In 2023, the company processed 1.40 billion barrels of crude oil (+15.3% YoY), produced 123 million tons of refined oil products (+16.5% YoY), and commercialized 34.38 million tons of chemical products (+8.7% YoY). In 2023, the company's refining and chemical sector's operating profit was 36.94 billion yuan (-9.0% YoY), of which the refining business operating profit was 36.25 billion yuan (-11.9% YoY), and the chemical business reversed losses to achieve operating profit of 680 million yuan.
Sales sector: Refined oil market demand has recovered, and annual performance has increased significantly. In 2023, the company achieved sales of 166 million tons of refined oil products (+10.1% YoY), with sales volume of 123 million tons in China (+17.2% YoY). The retail market share reached 36.6%, an increase of 2.2 percentage points over the previous year. In 2023, the company's sales segment achieved operating profit of 23.96 billion yuan (+66.7% year-on-year).
Natural gas sales sector: Continuously improving sales volume and efficiency, and performance flexibility is gradually showing. In 2023, the company sold 273.55 billion cubic meters of natural gas (+5.1% year over year), and it sold 219.76 billion cubic meters of natural gas in China (+6.1% year over year). In 2023, the company's natural gas sales segment achieved operating profit of 43.04 billion yuan (+232.2% year-on-year).
Risk warning: Risk of large fluctuations in oil prices; demand recovery falling short of expectations; domestic gas price rise falling short of expectations.
Investment advice: We lowered the forecast for the average price of Brent crude oil for 2024-2025 from $88, 90 to $85, 85 per barrel, and expect the average price of Brent crude oil to be $85 per barrel in 2026, lower 2024-2025, and add net profit to mother of 1735/1863/2029 billion yuan (original value: 2050/239 billion yuan), diluted EPS for 2024-2026 is 0.95/1.02/1.11, and the current PE for A-shares is 9.8/ 9.1/8.4x, 6.8/6.3/5.8x for H shares PE, maintaining a “buy” rating.