In 2023, the company achieved operating income of 3212.215 billion yuan, a year-on-year decrease of 3.19%; net profit to mother was 60.463 billion yuan, a year-on-year decrease of 9.87%. Among them, the fourth quarter achieved revenue of 742.274 billion yuan, a year-on-year decrease of 14.17%, a year-on-month decrease of 15.29%, and net profit to mother of 7.497 billion yuan, a year-on-year decrease of 23.79% and a decrease of 58.01% month-on-month. In 2023, the dividend per share was 0.345 yuan (tax included), and the cash dividend ratio was 72.1%. The company's operating quality continues to improve, future performance is expected to improve, and maintain a “buy” rating.
Key points to support ratings
Net profit after deduction increased year-on-year, and operating cash flow improved markedly. In 2023, the company's gross sales margin was 15.65%, up 0.62 pct year on year, and return on net assets (diluted) was 7.50%, down 0.94 pct year on year. Among them, gross sales margin for the fourth quarter was 15.97%, up 3.01% year on year, and return on net assets (diluted) was 0.87%, down 0.32 pct year on year. Net cash flow from the company's operating activities reached RMB 161,475 billion in 2023, up 38.9% year on year, after deducting non-net profit of RMB 60.692 billion, up 4.7% year on year, and net profit to mother fell year on year, mainly due to a combination of factors such as the company's equity income of RMB 13.7 billion from the transfer of Shanghai Secco shares in 2022, the year-on-year decrease in investment income in 2023, and the calculated mining rights concession revenue of RMB 7.4 billion.
Upstream oil and gas production has grown reasonably, and new breakthroughs have been made in increasing storage and reducing production costs. The average realized sales price of the company's crude oil in 2023 was RMB 3,833 per ton, a year-on-year decrease of 11.1%; the average realized sales price of natural gas was RMB 1,774 per thousand cubic meters, a decrease of 2.3% year-on-year. At the operating level, the company's domestic oil and gas reserves replacement rate was 131%; oil and gas equivalent production reached 504.09 million barrels, up 3.1% year on year; natural gas production was 1,337.8 billion cubic feet, up 7.1% year on year; oil and gas cash operating costs were RMB 755.2 per ton, a decrease of 2.3% year on year. The Exploration and Development Division effectively hedged the impact of falling oil and gas prices on performance by increasing storage and reducing production costs. In the future, as measures to stabilize oil and gas increase and reduce costs continue to advance, the upstream business is expected to maintain a high level of prosperity.
The refining and marketing business is operated in an integrated manner, and product structure adjustments are progressing in an orderly manner. In 2023, the company processed 258 million tons of crude oil, up 6.3% year on year, produced 156 million tons of refined oil products, up 11.3% year on year, and produced 14.31 million tons of ethylene, up 6.5% year on year. The total sales volume of refined oil products was 239 million tons, an increase of 15.6% over the previous year. In 2023, the unit cash operating cost of refining was 212.3 yuan/ton, a year-on-year decrease of 4.8%. The gross profit of refining was RMB 353 per ton, an increase of RMB 9 per ton over the previous year. The Refining Division achieved operating revenue of 20.6 billion yuan, an increase of 68.8% over the previous year. Faced with a market situation where supply exceeded demand and gross profit was weak, the operating loss was 6 billion yuan, a year-on-year decrease of 8.1 billion yuan. In the future, as downstream demand increases, refining and chemical business profits are expected to continue to recover.
Capital expenditure may be slightly reduced, and the dividend ratio will be further increased. In 2023, the company's capital expenditure was 176.8 billion yuan, with upstream (exploration and development sector) accounting for 44.46%, and refining (refining sector and chemical sector) accounting for 44.12%.
The company's planned capital expenditure in 2024 is $173 billion, with the upstream and refining sectors accounting for 44.97% and 40.81% respectively.
On the other hand, the board of directors proposed a cash dividend of 0.345 yuan per share (tax included) in 2023. In addition to the repurchase amount during the year, the annual cash dividend ratio will reach 72.1% (consolidated statement caliber according to Chinese corporate accounting standards), an increase of 7.62 pct over the previous year.
valuations
The company's operating quality continues to improve, and future performance is expected to improve. Based on market fluctuations and the impact of mineral rights transfer income and expenses, the company's net profit for 2024-2026 is estimated to be 64,642 billion yuan, 75.475 billion yuan and 81,168 billion yuan respectively, corresponding to EPS (diluted) of 0.53 yuan/share, 0.62 yuan/share, and 0.67 yuan/share. The corresponding net market ratio (PB) of the current stock price is 0.9 times, 0.9 times, and 0.9 times the purchase rating.
The main risks faced by ratings
Factors such as the risk of drastic fluctuations in international oil prices, changes in environmental protection policies, or natural disasters cause abnormal production facilities, production safety risks caused by personnel operation errors, and a downturn in the global economy.