Year-on-year increase in performance: Sinopec released its 2024 mid-year report. The company achieved revenue of 1576.131 billion yuan, a year-on-year decrease of 1.1%, and realized net profit to mother of 35.703 billion yuan, an increase of 1.7% over the previous year. Despite a decline in revenue and strong operating pressure in various sectors, the company achieved a year-on-year increase in performance in the first half of '24, mainly due to good results in reducing costs and increasing efficiency. For example, sales and management expenses, exploration expenses, etc. have all been significantly reduced through self-optimized management and control.

There are large differences in the operation of each sector: the situation is further divided between the company's four major business segments. The exploration and development division achieved an increase in operating income in the first half of the year, mainly due to rising oil and gas prices and sales. Among them, crude oil production increased slightly by 0.6%, and natural gas production continued to achieve a high increase of 6%. Crude oil processing volume is basically the same, but the product structure has changed greatly. Production of gasoline (6.6%) and kerosene (15.2%) increased markedly, while diesel (-8.8%) and chemical light oil (-7.4%) were significantly lower. In terms of sales of refined oil products, domestic sales volume decreased by 2.5% year on year, while export volume increased markedly. Among chemical products, ethylene production decreased by 5.5% year-on-year due to profit differences between olefin and aromatic hydrocarbon products, while synthetic fiber monomers and polymers, mainly aromatic hydrocarbons, increased 17.8%.

Maintaining high dividend repurchases: The company proposes to pay a mid-2024 cash dividend of $0.146 per share (tax included), which is basically the same as the same period last year ($0.145 per share). In addition, the company also disclosed the repurchase plan. The plan is to repurchase the A-shares issued by the company within 3 months from August 23 to no less than 0.8 billion yuan, no more than 1.5 billion yuan, and all of the repurchased shares will be cancelled.

According to the company's 2024 mid-year report, we have adjusted the company's rate for the period and sales volume and prices of some products. We adjusted the company's 2024-2026 EPS to 0.057, 0.059, and 0.06 billion yuan (the original forecast was 0.54, 0.62, 0.70 yuan), and adjusted the target price to 7.41 yuan to 7.41 yuan according to the comparable company's 24-year adjusted 13 times PE, maintaining the “gain” rating.

Risk warning

Crude oil prices fluctuated greatly; demand for refined products declined; annual production fell short of expectations.