Key points of investment
Event: The company released its 2023 annual report: achieved operating income of 3212.2 billion yuan (-3% YoY) and net profit to mother of 60.5 billion yuan (-10% YoY). Among them, 2023Q4 achieved operating income of 742.3 billion yuan (-14% YoY, -15% YoY) and net profit of 7.5 billion yuan (-22% YoY, -58% YoY).
In 2023, the company's taxes payable were 40 billion yuan (+41% year over year), mainly affected by increased circulation taxes such as mining rights concession proceeds (7.4 billion yuan) and consumption tax; achieving investment income of 5.8 billion yuan (-60% year over year), mainly due to the large return from Shanghai SECCO's share sales in 2022, while the chemical market was sluggish in 2023, and the efficiency of joint ventures and joint ventures declined. Overall, excluding the one-time impact, the company's business situation is improving.
Reduce capital expenditure and continue to implement strategies to stabilize oil and increase gas. 1) Capital expenditure: ① In 2023, the company's capital expenditure was 176.8 billion yuan, -12.3 billion yuan (-7%) year-on-year. Among them, capital expenses for exploration and development/refining/marketing and distribution/chemicals/division and others were 786/229/157/550/4.5 billion yuan, compared to -47/+0/ -34/ -36/ -700 million yuan compared to the same period last year. ② In 2024, the company plans to spend 173 billion yuan on capital, -3.8 billion yuan (-2%) year on year. Among them, exploration and development/refining/marketing and distribution/chemicals/headquarters and other capital expenses were 778/248/458/6.2 billion yuan, year-on-year -8/+19/+27/ -92/+1.7 billion yuan; 2) Oil and gas production target: In 2024, the company plans to produce about 509 million barrels of oil equivalent (+1% year over year), of which crude oil production is 279 million barrels (-0.7% year on year) and natural gas production is 39 billion cubic meters (+3.1% year on year).
Excellent balance sheet performance: 1) Cash: In 2023, the company's monetary capital was 165 billion yuan, an increase of 19.9 billion yuan over the same period last year, with sufficient cash reserves; 2) Balance ratio: In 2023, the company's balance ratio was 52.7% (+0.9 pct year on year).
The company focuses on shareholder returns: in 2023, the total amount of dividends+repurchases of the company was 43.575 billion yuan, of which 41.2 billion yuan (mid-term and final dividends of 0.145 and 0.2 yuan/share, respectively), and repurchases of 2,325 billion yuan.
1) Only dividends are considered: The company's 2023 dividend ratio is 68.2% (70.7% under international standards). According to the closing price on March 26, 2024, the dividend rate for Sinopec A shares is 5.5%; the dividend rate for Sinopec H shares is 8.4%, tax-deducted at 20%, and the dividend rate after tax is 6.7%. 2) Consider dividends+repurchases: The company's 2023 dividend ratio is 72.1% (74.7% under international standards). According to the closing price on March 26, 2024, the dividend rate for Sinopec A shares is 5.8%; the dividend rate for Sinopec H shares is 8.8%, tax-deducted at 20%, and the dividend rate after tax is 7.2%.
Profit forecast and investment rating: Based on the progress of the company's strategy to stabilize oil and increase gas, as well as the recovery in demand for refined oil products and the expansion of overseas price spreads, we adjusted net profit of 640 billion yuan and 66.6 billion yuan (previously 83.6 billion yuan and 89.1 billion yuan), respectively, and added 66.6 billion yuan in net profit to mother in 2026. According to the closing price on March 26, 2024, the corresponding PE of A-shares is 11.8, 11.3, and 11.2 times, respectively, and the corresponding PB of A-shares is 0.91, 0.89, and 0.87 times, respectively. The company has remarkable profitability, excellent cost control, and maintains a “buy” rating.
Risk warning: geopolitical risks; macroeconomic fluctuations; recovery in demand for refined oil products falls short of expectations