occurrences

Sinopec released its semi-annual performance report: in the first half of 2024, it achieved operating income of 1576.131 billion yuan, a year-on-year decrease of 1.10%; realized net profit to mother of 35.703 billion yuan, an increase of 1.69% over the previous year. Among them, 2024Q2 achieved revenue of 786.164 billion yuan in a single quarter, down 2.02% year on year and 0.48% month on month, and realized net profit to mother of 17.387 billion yuan, up 15.84% year on year and 5.07% month on month.

Key points of investment

Net profit to mother increased 15.84% year-on-year in the second quarter

The company's oil and gas exploration and extraction sector achieved oil and gas equivalent production of 257.66 million barrels in the first half of the year, and achieved a 3.7 billion year-on-year increase in operating income under high oil prices, which was one of the main reasons for the company's profit increase in the first half of the year; the company processed 0.1267 billion tons of crude oil and produced 77.3 million tons of refined oil products, up 1.6% year on year. Among them, gasoline production increased 6.6% year on year, and kerosene production increased 15.2% year on year; sales sector, total sales of refined oil products in the first half of the year were 0.119 Billions of tons, up 2.1% year on year. Among them, total domestic sales of refined oil products were 90.14 million tons, down 2.5% year on year, and overseas sales were 28.87 million tons, up 19.64% year on year, which was the main reason for the increase in refined oil sales; the chemical business produced 6.496 million tons of ethylene in the first half of the year, down 5.5% year on year, and production of synthetic fiber monomers and polymers increased 17.8% year on year. In the face of poor domestic demand, the company actively explores domestic and foreign markets. The export volume of chemical products increased 17.8% year on year, and the gross margin of the chemical business was basically the same as in 2024.

Pay attention to shareholder returns, make it clear that the dividend ratio for the next three years will not be less than 65%, and that high dividends will continue to be stable in the future

The company attaches great importance to investor returns and has maintained the continuity and stability of dividends over the years. Since 2022, the board of directors has strengthened value management and initiated domestic and foreign share repurchases, which has greatly enhanced the company's value. The company will continue to implement share repurchases this year. The board of directors proposed that the company's annual cash dividend ratio for the next three years should not be less than 65% to stabilize investors' expectations for high dividends in the future. At the same time, the company announced that it will distribute a mid-term cash dividend of 0.146 yuan (tax included) per share in 2024.

Capital expenditure has gradually been reduced, cash flow has increased significantly, and there are still expectations for future improvements

The company's capital expenditure for the first half of the year was RMB 55.893 billion, with capital expenditure of 74.7 billion yuan in the same period last year, a year-on-year decrease of 18.8 billion yuan. At the same time, due to the reduction in the company's operating capital occupation, the net cash inflow from operating activities increased by 14.7 billion yuan, and the company's cash balance in the first half of the year was 122.1 billion yuan, an increase of 27.3 billion yuan. The company's cash flow increased sharply in the first half of the year. It is expected that profit expectations improve and capital expenditure will be further reduced. The company's cash flow will continue to improve in the future.

Profit forecasting

The company's net profit for 2024-2026 is estimated to be 70.7 billion yuan, 76.9 billion yuan, and 81.5 billion yuan respectively. The PE corresponding to the current stock price is 11.9, 10.9, and 10.3 times, respectively, giving it a “buy” investment rating.

Risk warning

The economic recession brought about a decline in demand for crude oil; the commissioning of the project fell short of expectations; the price of raw materials rose; downstream demand fell short of expectations; the risk of large fluctuations in product prices, etc.