Event: On March 26, 2024, the company released its 2023 annual report. In 2023, the company achieved operating income of 3011.01 billion yuan, down 7.0% year on year; net profit to mother was 161.14 billion yuan, up 8.3% year on year; net profit after deducting non-return to mother was 187.13 billion yuan, up 9.9% year on year.
23Q4 net profit without return to mother increased month-on-month, and the share of taxes and surcharges increased throughout the year. In 23Q4, the company's revenue was 728.88 billion yuan, down 7.0% year on year and 9.1% month on month; net profit to mother was 29.49 billion yuan, up 2.4% year on year, down 36.4% month on month; after deducting non-net profit, it was 52.57 billion yuan, up 28.2% year on year, up 11.4% month on month. Looking at the whole year, since China began implementing the “Mining Rights Sale Proceeds Collection Measures” on May 1, 2023 to levy mining rights concession proceeds in the form of mining rights concession yields for petroleum, natural gas and other minerals. Among them, the yield on land mining rights concession was 0.8%, 0.6% for marine land, and 0.3% for coalbed methane. Thus, despite the decline in oil prices, corporate taxes and surcharges still increased 6.6% year on year to 295.02 billion yuan. The share of taxes and surcharges in 2023 was 9.8%, up 1.3 pct from year on year. Among them, the company added The proceeds from the payment of mining rights concessions were 23.69 billion yuan.
Oil and gas equivalents have been growing steadily, and the benefits of reducing costs and improving efficiency are remarkable. 1) Oil and gas production: In 2023, the company promoted efficient exploration, stabilized production in old oil and gas fields and efficient construction in the new area, and implemented two deep Taco 1 wells and two 10,000 micke exploration wells. The annual oil and gas equivalent production was 1,759 billion barrels of oil equivalent, an increase of 4.4% over the previous year. By type, crude oil production was 937 million barrels, up 3.4% year on year; natural gas production was 4932.4 billion cubic feet, up 5.5% year on year. In 2024, the company plans to produce 909 million barrels of crude oil and 5142.6 billion cubic feet of natural gas, for a total oil and gas equivalent of 1,766 million barrels. 2) Oil and gas prices: In 2023, the average realized price of the company's crude oil was 76.6 US dollars/barrel, down 16.8% year on year; the average realized price of natural gas was 2.076 yuan/cubic meter, down 22.7% year on year, mainly due to a significant drop in overseas re-export trade prices. 3) Oil and gas costs: In 2023, the operating cost per unit of oil and gas was 12.0 US dollars/barrel, a year-on-year decrease of 3.8%. 4) New energy: In 2023, the company's new energy business achieved large-scale leapfrog development, generating 2.2 billion kilowatt-hours of wind power and adding 3.7 million kilowatts of installed wind power; the new energy development and utilization capacity reached 11.5 million tons of standard coal per year; CCUS injected 1.592 million tons of carbon dioxide. 5) In terms of profitability, in 2023, the oil and gas and new energy sector achieved operating profit of 148.70 billion yuan, a year-on-year decrease of 10.3%, which is significantly less than the price drop of crude oil and natural gas.
The profitability of natural gas sales has increased dramatically. In 2023, the company sold 273.55 billion cubic meters of natural gas, up 5.1% year on year; at the same time, the company coordinated the procurement of various natural gas resources, optimized the structure of imported gas resource pools, and made efforts to control procurement costs and improve the efficiency of the terminal business. The sector achieved operating profit of 43.04 billion yuan, a year-on-year increase of 232.2%. Among them, 23Q4, driven by net price reduction, operating profit reached 23.57 billion yuan, a significant increase of 340.0% over the previous year.
Increase production of high-end specialty refining chemical products, and turn losses into profits in the chemical business. In 2023, the company's gas/diesel/kerosene production was 4977.6/5839.9/145.61 million tons, respectively, +14.4%/+8.9%/+77.7% compared with the same period last year.
Among the main chemicals, the production of ethylene/synthetic resin/synthetic fiber raw materials and polymer/synthetic rubber/urea was 800.1/1257.9/109.8/96.6/2.03 million tons, respectively, +7.8%/+8.3%/-0.1%/-7.5%/-9.8% compared with the same period last year. In terms of business performance, the refining business achieved operating profit of 36.25 billion yuan in 2023, a year-on-year decrease of 11.9%, mainly due to the combined effects of narrowing refining gross profit space and increased production; the chemical business achieved operating profit of 684 million yuan, reversing the year-on-year loss.
Demand in the refined oil market picked up, and sales business profits increased dramatically. The company's sales business strengthens production and marketing collaboration to ensure the smooth operation of the crude oil industry chain. In 2023, domestic gas/diesel sales volume was 5154.1/6189.0/9.55,000 tons, a year-on-year change of +16.4%/+11.7%/+82.1%; international sales volumes were 1559.5/1781.0/9.7 million tons, respectively, with a year-on-year change of +12.0%/-23.7%/+9.7%. The operating profit of the sales business for the year was 23.962 billion yuan, an increase of 66.7% over the previous year.
It is proposed to pay a final cash dividend of 0.23 yuan/share, an annual dividend of 0.44 yuan/share, a dividend rate of 50%, and a dividend rate of 4.7%/7.5% for A/H shares. The company plans to distribute a final tax-inclusive cash dividend of 0.23 yuan/share, plus the mid-term dividend plan of 0.44 yuan/share for the whole year. The corresponding cash dividend ratio is 50%. Based on the closing price and exchange rate on March 25, 2024, the dividend rates for A shares and H shares are 4.7% and 7.5%, respectively.
Investment advice: The company is a leading domestic oil and gas enterprise, rich in upstream oil and gas resources, and a complete downstream industrial chain. We expect the company's net profit for 2024-2026 to be 1728.84/1810.12/188531 billion yuan, EPS of 0.94/0.99/1.03 yuan/share, respectively, and the PE corresponding to the closing price on March 25, 2024 will be 10/9/9 times, respectively, maintaining the “recommended” rating.
Risk warning: the risk of crude oil price fluctuations, the risk of declining chemical sentiment, and the risk that downstream demand falls short of expectations.