Incident: The company issued a voluntary contract announcement. In the first three quarters of 2024, the total value of new contracts signed by the company was 73.457 billion yuan, an increase of 65.6% over the previous year. As of September 30, 2024, the company's uncompleted contracts amounted to $165.773 billion.

Comment:

The amount of new contracts signed is growing rapidly, and overseas markets are expanding rapidly. In the first three quarters of 2024, the company signed new domestic contracts of 46.9 billion yuan, up 32% year on year, and 26.6 billion yuan of new contracts signed abroad, up 202% year on year. The share of overseas contracts increased from 20% in the first three quarters of 2023 to 36%, continuing the strong development trend.

The company's business structure is more optimized, and the share of EPC contracts increased from 54% in the first three quarters of 2023 to 74%, indicating that the company's general contract construction capacity is increasing and is highly recognized by the owners. In the first three quarters of 2024, company representative contracts in the domestic market included Mango Ethylene Project (6.081 billion yuan), Huajin Project (5.807 billion yuan), etc. In overseas markets, the company's representative new contracts include the Silleno ethane cracking project in Kazakhstan (1.25 billion US dollars) and the Saudi Jafurah Phase III project (0.9 billion US dollars).

The sources of contracts are diversified, and on-hand orders have reached an all-time high. By industry, the industries covered by the company's new contracts in the first three quarters of 2024 showed a diversified trend. The amount of new contracts signed in the refining, new coal chemical, storage and other industries grew rapidly, with +95%, +1850%, and +256%, respectively, while the petrochemical industry signed new contracts +20% year-on-year. The share of new contracts signed in the petrochemical industry fell to 58% from 80% in the first three quarters of 2023. In the first three quarters of 2024, Sinopec's share of internal contracts increased slightly from 30.3% in the first three quarters of 2023 to 41.7%, and the company's expansion into the external market gradually stabilized. As of September 30, 2024, the company's on-hand orders were 165.8 billion yuan, an increase of 40% over the previous year, reaching a record high, providing strong support for the company's continued business development in the future.

Domestic and foreign markets welcome new opportunities, and the company is expected to fully benefit from strengthening market development. In terms of the domestic market, China's modern industrial system is being built at an accelerated pace, and the high-quality development of the petrochemical industry is progressing steadily. The construction of a number of large-scale refining and chemical bases is progressing rapidly, the downstream petrochemical industry chain continues to expand, and capital expenditure for high-end new material projects continues to grow; related policies such as energy saving and carbon reduction transformation, process optimization and upgrading, and energy equipment upgrading have been introduced one after another, bringing more opportunities for the development of the company's main business. In terms of overseas markets, active capital expenditure in the Middle East has exceeded 100 billion US dollars, and the refining and chemical production capacity of oil-producing countries is increasing year by year. Sinopec Group deepens “Belt and Road” cooperation. The company has fully benefited from platform advantages, and the prospects for obtaining orders in the Middle East market are broad. The company is strengthening its market development efforts. With the steady progress of new contracts at home and abroad, the business is expected to usher in rapid growth.

Profit forecasting, valuation and rating: The company relies on Sinopec Group's resource advantages and continues to explore domestic and overseas markets. Performance is expected to usher in rapid growth. The company's undervaluation+high dividend value is prominent in the context of state-owned enterprise reform. We maintain the company's profit forecast. The company's net profit for 2024-2026 is estimated to be 2.638, 2.915, and 3.182 billion yuan, respectively, and the corresponding EPS is 0.60, 0.66, and 0.72 yuan/share, respectively, maintaining the company's “buy” rating.

Risk warning: risk of fluctuating prosperity in the refining and chemical industry, project progress falling short of expectations, overseas market risk.