Core views

Sinopec's revenue for the first three quarters of 2024 was 2.37 percent, or -4.2% year on year; net profit to mother was 44.25 billion, or -16.5% year over year. Looking at a single quarter, Q3 revenue was 790.4 billion, -9.8% YoY, +0.54% month-on-month; net profit to mother was 8.54 billion, or -52.1% YoY, or -50.9%. The decline in Q3 quarterly results was mainly due to the unilateral upward trend in oil prices in Q3 last year, while oil prices fell rapidly in 24Q3, a sharp year-on-year decrease in the company's inventory earnings, and the decline in gross profit of petroleum and petrochemical products. By sector, the company's oil and gas sector achieved oil and gas equivalent output of 386.1 million barrels, up 2.6% year on year. Among them, natural gas production was 1,048 billion cubic feet, up 5.6% year on year, and EBIT was 45.21 billion billion in the first three quarters; the refining sector processed 190.69 million tons of crude oil to produce 116.6 million tons of refined oil products, including gasoline +4.1%, kerosene +10.5%, and diesel -10.7%. The EBIT for the first three quarters was 61.5.6. billion yuan; The total sales volume of refined oil products in the sales sector was 181.67 million tons, up 0.6% year on year. The EBIT for the first three quarters was 19.866 billion yuan, the total operating volume of the chemical sector was 62.17 million tons, and the loss before interest and tax was RMB 4.787 billion.

occurrences

The company released its 2024 three-quarter report: the company's revenue for the first three quarters of 2024 was 2.37 percent, -4.2% year over year; net profit to mother was 44.25 billion, or -16.5% year over year.

Brief review

Fluctuations in crude oil inventories and gross profit for some products affected the company's Q3 performance. The company's revenue for the first three quarters of 2024 was 2.37 percent, -4.2% year over year; net profit to mother was 44.25 billion, or -16.5% year over year. Looking at a single quarter, Q3 revenue was 790.4 billion, -9.8% YoY, +0.54% month-on-month; net profit to mother was 8.54 billion, or -52.1% YoY, or -50.9%. The decline in Q3 quarterly results was mainly due to the unilateral upward trend in oil prices in Q3 last year, while oil prices fell rapidly in 24Q3, a sharp year-on-year decrease in the company's inventory earnings, and the decline in gross profit of petroleum and petrochemical products.

The overall operating volume is steady. The oil and gas sector achieved oil and gas equivalent output of 386.1 million barrels, an increase of 2.6% year on year. Among them, natural gas production was 1,048 billion cubic feet, up 5.6% year on year, and EBIT was 45.21 billion in the first three quarters; the refining sector processed 19, 0.69 million tons of crude oil and produced 116.6 million tons of refined oil products, including gasoline +4.1%, kerosene +10.5%, diesel- 10.7%, the EBIT for the first three quarters was 6.156 billion yuan; the total sales volume of refined oil products in the sales sector was 181.67 million tons, up 0.6% year on year; EBIT in the first three quarters was 19.866 billion yuan; the total operating volume of the chemical sector was 62.17 million tons; loss before interest and tax was RMB 47.8.7 billion.

Steadily promote buybacks and holdings increase, demonstrating confidence in long-term development

In September 2024, the company began this round of repurchases. As of the reporting period, 7,490,800 A shares have been repurchased, with a total amount of RMB 47.31 million; a total of 111,192,000 H shares have been repurchased, with a total amount of HK$0.506 billion. Sinopec Group Corporation, the controlling shareholder of the company, increased its holdings in the company within 12 months from November 2023, increasing its holdings by 297,263,456 shares.

Profit forecast and valuation: The company's net profit for 2024, 2025, and 2026 is estimated to be 57.1/66.3/72.9 billion yuan, EPS 0.47 yuan, 0.54 yuan, and 0.60 yuan respectively; the corresponding PE is 13X, 11X and 10X, respectively.

Risk analysis

(1) Risk of changes in the macroeconomic situation: the company's operations may be affected by carbon tariffs and trade protection in some countries, the impact of uncertainty about changes in geopolitics and international oil prices on investment returns in domestic and overseas upstream projects and investment in refining and warehousing projects; (2) Risk of changes in the industry cycle: Some of the company's business and related products have cyclical characteristics, and are sensitive to macroeconomic environments, cyclical changes in regional and global economies, industry policies, production capacity and output changes, the price and supply of raw materials, and the price and supply of alternative products; (3) macro Policy and government regulatory risks: The macroeconomic policies and industrial policies that have been introduced and new changes that may occur in the future may further affect the development of the industry and the market environment, and have an impact on the company's production, operation and efficiency; (4) Risks caused by changes in environmental regulations: relevant governments may promulgate and implement stricter environmental protection laws and regulations and establish stricter environmental standards;

(5) Crude oil outsourcing risk: Crude oil prices have fluctuated greatly in recent years due to various factors such as crude oil supply and demand conflicts, geopolitics, and global economic growth. In addition, some extremely major emergencies may also cause short-term interruptions in crude oil supply in some regions; (6) Production and operation risks and natural disaster risks: The petroleum and petrochemical industry is a high-risk industry that is flammable, explosive, toxic, harmful, and pollutes the environment. At the same time, it is vulnerable to natural disasters such as extreme weather.