CNPC announced its 2024 three-quarter report. In the first three quarters of 2024, the company achieved operating income of 2256.279 billion yuan, a year-on-year decrease of 1.1%; net profit attributable to shareholders of the parent company was 132.518 billion yuan (equivalent to 0.72 yuan per share), an increase of 0.7% over the previous year.

Although oil prices fell month-on-month in 3Q24, profits continued to increase month-on-month. Oil prices showed a downward trend in the third quarter.

Brent also fell from nearly 90 US dollars/barrel in early July to around 70 US dollars/barrel at the end of September. The average quarterly price was 78.71 US dollars/barrel, down 7.43% from the previous month. The company overcame the adverse effects of falling oil prices and achieved month-on-month profit growth. In the third quarter, the company achieved net profit of 43.911 billion yuan to mother, an increase of 2.29% over the previous quarter.

Oil and gas and new energy business: Profits are growing steadily. In the first three quarters of 2024, the oil and gas and new energy division achieved operating income of 678.452 billion yuan, an increase of 4.7% year on year; operating profit of 144.262 billion yuan, an increase of 8.7% year on year. The average price of Brent crude oil in the first three quarters of 2024 was 81.88, 85.02, and 78.71 US dollars/barrel, respectively. Although crude oil prices declined in the third quarter, cost control was effective, and the profitability of the oil and gas business sector increased sequentially in the third quarter. The EBITs of this business sector in the first three quarters of 2024 were $12.89 per barrel, $15.22 per barrel, and $16.80 per barrel, respectively.

Refining, chemical and new materials business: Price spreads narrowed and profits declined. In the first three quarters of 2024, the Refining, Chemical and New Materials Division achieved operating income of 923.888 billion yuan, an increase of 2.3% over the previous year; operating profit of 15.28 billion yuan, of which the refining business achieved operating profit of 11.781 billion yuan and the chemical business achieved operating profit of RMB 3.499 billion, an increase of RMB 3.368 billion over RMB 0.131 billion in the same period last year. In the first three quarters of 2024, the EBITs for the company's refining and new materials business were $3.24, 2.24, and $0.67 per barrel, respectively. The profitability of this business segment declined, which we believe was mainly due to the fall in crude oil prices in the third quarter, which increased cost pressure and inventory losses.

Natural gas sales business: In the first three quarters of 2024, the natural gas sales division achieved operating income of 424.855 billion yuan, an increase of 8.2% over the previous year; realized operating profit of RMB 25.268 billion, an increase of 5.792 billion yuan over the same period last year. Increased natural gas production and increased profitability are important reasons for this business sector's profit growth.

Sales business segment: In the first three quarters of 2024, the sales division achieved operating income of RMB 1885.042 billion and operating profit of RMB 12.9 billion.

Profit forecasting and investment advice. We expect the company's EPS in 2024-2026 to be 0.92, 0.95, and 0.98 yuan, respectively, and 8.32 yuan for BPS in 2024. Referring to the valuation level of comparable companies, they were given 1.3-1.5 times PB in 2024, corresponding to a reasonable value range of 10.82-12.48 yuan, maintaining a “superior to the market” investment rating.

Risk warning: falling crude oil prices, falling natural gas prices, declining prosperity in the refining and chemical industry, etc.