Incidents:
On March 25, 2024, CNPC released its 2023 annual report: in 2023, the company achieved operating income of 3011 billion yuan, a year-on-year decrease of 7%; realized net profit of 161.1 billion yuan, up 8% year on year; net profit after deducting non-return to mother was 187.1 billion yuan, up 10% year on year; weighted average return on net assets was 11.4%, up 0.1 percentage point year on year. The gross profit margin on sales was 23.5%, up 1.6 percentage points from the previous year; the net profit margin was 6.0%, up 0.9 percentage points from the previous year. Net cash flow from operating activities was $456.6 billion.
Among them, the company achieved revenue of 728.9 billion yuan in 2023Q4, -7% year-on-year; realized net profit of 29.5 billion yuan, +1% year-on-year and -36% month-on-month; net profit after deduction of 52.6 billion yuan; and ROE was 2.1%, down 0.1 percentage points year-on-year and 1.2 percentage points month-on-month. The gross profit margin on sales was 29.3%, up 4.7 percentage points year on year, up 6.9 percentage points month on month; net sales margin was 4.7%, up 0.8 percentage points year on year, down 1.8 percentage points month on month.
Investment highlights:
Against the backdrop of falling international oil prices, the company's operating performance shows resilience. The average price of Brent crude oil in 2023 was 82.64 US dollars/barrel, down 18.4% year on year. Against the backdrop of a broad decline in international crude oil prices, the company's business performance maintained steady growth, reaching record highs for two consecutive years, and the resilience of the industry chain to changes in macroeconomic factors such as oil prices increased markedly. In 2023, the company achieved operating income of 3011 billion yuan, a year-on-year decrease of 7%, and net profit to mother of 161.1 billion yuan, an increase of 8.3% over the previous year. By segment, 1) The oil and gas business achieved revenue of 892.3 billion yuan, -4% year-on-year, and operating profit of 165.7 billion yuan, or -10% year-on-year. On the one hand, due to the decline in crude oil and natural gas prices, the company achieved an average annual crude oil price of 76.60 US dollars/barrel, a year-on-year decrease of 16.8%; on the other hand, the company continued to promote “stabilizing oil and gas growth”. Oil and gas equivalent production in 2023 was 1,759 billion barrels, +4.4% over the same period last year, with natural gas production growing rapidly.
2) The refining, chemical and new materials business achieved revenue of 12212 billion yuan, an increase of 5% over the previous year, and achieved operating profit of 36.9 billion yuan, or -9% year-on-year. On the one hand, the company made every effort to increase the load. The Guangdong petrochemical integration project was put into operation. In 2023, 1,399 billion barrels of crude oil were processed, +15% year over year, producing 122.74 million tons of refined oil products, +17% year over year, and the commercial volume of chemical products was 34.31 million tons, or +9% year over year.
On the other hand, sales prices of refined and chemical products have declined, compounded by the high consumption of Guangdong Petrochemical in the early stages of production. The company's cash processing cost per refining unit increased 7% to 231 yuan/ton over the same period last year.
3) The sales business achieved revenue of 2527.1 billion yuan, a year-on-year decrease of 9%, mainly due to a drop in the price of refined oil products and a decrease in international trade revenue, but the sales volume and market share of refined oil products increased markedly. In 2023, the company sold 165.8 million tons of gasoline, kerosene, and diesel, +10% over the same period last year. Thanks to the integrated collaboration of the crude oil industry chain and the increase in gross profit of the non-oil business, the sales business achieved operating profit of 24 billion yuan in 2023, an increase of 67% over the previous year.
4) The natural gas sales business achieved revenue of 561.2 billion yuan, +8% year-on-year, and operating profit of 43 billion yuan, an increase of 301 billion yuan over the previous year. On the one hand, domestic natural gas sales volume and price have increased rapidly; on the other hand, the company has optimized the imported gas resource pool, rationally arranged the pace of natural gas imports, effectively controlled the cost of imported gas, continuously optimized resource allocation, and increased the development of high-end efficient markets and terminal markets.
Furthermore, the Chinese government implemented the “Measures for the Collection of Mining Rights Proceeds” on May 1, 2023, and the company paid an additional 23.7 billion yuan in mining rights concession revenue in 2023.
High dividends focus on shareholder returns and highlight the investment value of central enterprises
The company focuses on shareholder returns and increases dividends. The board of directors recommended a year-end dividend of $0.23 per share (tax included), plus the mid-2023 dividend of $0.21 per share (tax included), and the annual dividend of 0.44 yuan (tax included) per share. The total dividend amount is about $80.53 billion, the dividend ratio is 50%, and the 2023 dividend rate is about 6.2%. The dividend per share for the end of 2023 and the full year was at the highest level in history. The company continued to maintain a high level of cash dividends, protect shareholders' rights and interests, and highlight the investment value of central enterprises.
Continuing to increase capital expenditure. In terms of capital expenditure for upstream exploration and midstream refining and upgrading in an orderly manner, the company's capital expenditure in 2023 was 275.3 billion yuan, +0.4% year on year, the oil and gas and new energy division accounted for 90% of capital expenditure. The company's proven crude oil reserves in 2023 were 6.219 billion barrels, -3.1% year over year, and confirmed natural gas reserves were 72794 billion cubic feet, or -0.9% year on year.
The company continued to maintain a high level of capital expenditure in 2024, with a capital expenditure budget of 258 billion yuan, an increase of 6% over the early 2023 budget. The oil and gas and new energy segment accounted for 83%, mainly for large-scale exploration and development of domestic key basins such as Songliao, Ordos, Junggar, Tarim, Sichuan, and Bohai Bay, as well as the development of shale gas and shale oil, to accelerate gas storage capacity building, and continue to promote production capacity construction for key overseas projects. In 2024, the company plans to produce 909.2 million barrels of crude oil and 5142.6 billion cubic feet of marketable natural gas, for a total oil and gas equivalent of 1,766.3 million barrels. The refining, chemical and new materials division accounts for 11%. It is mainly used for the transformation and upgrading project of Jilin Petrochemical and Guangxi Petrochemical, the 1.2 million tons/year phase II ethylene project in Tarim, and the transformation and upgrading project of Lanzhou Petrochemical. In 2024, the company plans to process 1403.9 million barrels of crude oil.
Profit forecasts and investment ratings
The company's net profit for 2024/2025/2026 is estimated to be 173.6, 1798, and 186.9 billion yuan, respectively, and the corresponding PE is 9.7, 9.4, and 9.0 times. As a leader in the domestic oil and gas industry, the company is expected to benefit from high oil prices. Combined, the company has achieved remarkable results in reducing costs and increasing efficiency, demonstrating the determination of central enterprises to reform and maintain a “buy” rating.
Risk warning
International crude oil/refined oil and natural gas price fluctuation risk; industry regulation and tax policy risk; exchange rate risk; risk of increased market competition; risk of uncertainty in oil and gas reserves; risk of overseas operations.