Key points of investment
The company's profit is improving: Under international standards, the company achieved operating income of 3212.4 billion yuan (-3% YoY) and net profit to mother of 58.3 billion yuan (-12% YoY) in 2023. Among them, 2023Q4 achieved operating income of 742.5 billion yuan (-14% YoY, -15% YoY) and net profit of 4.3 billion yuan (YoY -52%, -76% 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.
It is planned to increase capital expenditure and continue to implement the strategy of stabilizing oil and increasing gas. 1) Capital expenditure: ① In 2023, the company's actual capital expenditure was 176.8 billion yuan, compared with the actual capital expenditure in 2022, -12.3 billion yuan (-7%) year-on-year. Among them, the actual capital expenses of 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 expenditure, which is +7.2 billion yuan (+4%) compared with the planned capital expenditure in 2023. Among them, exploration and development/refining/marketing and distribution/chemical/division and other capital expenses were 778/248/458/6.2 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 over year) and natural gas production is 39 billion cubic meters (+3.1% year over 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 April 15, 2024, the dividend rate for Sinopec A shares is 5.1%; the dividend rate for Sinopec H shares is 8.0%, tax-deducted at 20%, and the dividend rate after tax is 6.4%. 2) Consider dividends+repurchases: The company's 2023 dividend ratio is 72.1% (74.7% under international standards). According to the closing price on April 15, 2024, the dividend rate for Sinopec A shares is 5.4%; the dividend rate for Sinopec H shares is 8.5%, tax-deducted at 20%, and the dividend rate after tax is 6.9%.
Profit forecast and investment rating: According to the progress of the company's strategy to stabilize oil and increase gas, and the recovery in demand for refined oil products & the expansion of overseas price spreads, we expect the company's net profit to be 641, 671, and 67.4 billion yuan respectively for 2024-2026 (Note: The profit forecast for 2024-2026 is the forecast value of Sinopec A shares, and there are differences in the accounting standards for A/H shares, resulting in a slight difference in the forecast scale.) According to the closing price on April 15, 2024, the corresponding H share PE is 8.68, 8.29, and 8.26 times, respectively, and the corresponding H share PB is 0.56, 0.54, and 0.53 times, respectively.
The company has remarkable profitability and excellent cost control. For the first time, coverage was given a “buy” rating.
Risk warning: geopolitical risks; macroeconomic fluctuations; recovery in demand for refined oil products falls short of expectations; risk of falling crude oil prices