Description of the event

The company disclosed its report for the third quarter of 2024. In the first three quarters of 2024, the company achieved operating income of 2256.279 billion yuan, a year-on-year decrease of 1.13%; net profit to mother was 132.518 billion yuan, an increase of 0.66% over the previous year. Among them, Q3 achieved revenue of 702.41 billion yuan in a single quarter, a year-on-year decline of 12.45%. Net profit attributable to mother was 43.911 billion yuan, a year-on-year decrease of 5.31%.

Incident comments

The increase in production continues to advance, and the increase in oil and gas business performance is superior to the fluctuation in oil prices during the same period. In the first three quarters of 2024, the company achieved oil and gas equivalent production of 1342.3 million barrels, an increase of 2.05% over the previous year. Among them, crude oil production was 708.3 million barrels, up 0.33% year on year; natural gas production was 634 million barrels of oil equivalent, up 4.04% year on year. Oil and gas operating costs per unit were $11.49 per barrel, an increase of 2.1% year over year. The average price of oil in the first three quarters of 2024 was 81.82 US dollars/barrel, which was basically the same as the previous year. However, the price of oil reached 76.88 US dollars/barrel in the first three quarters, an increase of 2.1% year on year. The final sector achieved operating profit of 144.262 billion yuan in the first three quarters of 2024, an increase of 8.7% over the previous year, far superior to international oil price fluctuations during the same period.

The gross profit of refined oil products has narrowed, and the chemical business has improved. In the first three quarters of 2024, 1036.2 million barrels of crude oil were processed, down 0.7% year on year; 89.909 million tons of refined oil products were produced, down 2.75% year on year; 6.356 million tons of ethylene were produced, up 9.1% year on year; and commercial volume of chemical products was 28.643 million tons, up 9.7% year on year. The refining, chemical and new materials business achieved operating profit of 15.28 billion yuan, a year-on-year decrease of 45.06%. Among them, due to the narrowing of the gross profit of refined products, the refining business achieved operating profit of 11.781 billion yuan, a year-on-year decrease of 57.44%; due to improvements in the domestic chemical market, the operating profit of the chemical business was 3.499 billion yuan, which was only 0.131 billion yuan in the same period last year, with a year-on-year increase of 3.368 billion yuan.

Sales volume has increased and imported gas costs have been reduced, and the profitability of the natural gas sales business has increased dramatically. The natural gas sales business continuously optimizes the resource pool structure to effectively reduce comprehensive procurement costs; optimizes sales strategies, actively uses sales methods such as online sales and spot procurement, continuously optimizes market layout, user structure and sales flow, actively explores the terminal market, and strives to improve sales volume and efficiency. In the first three quarters of 2024, sales of natural gas were 209.82 billion cubic meters, up 8.6% year on year, and sales of natural gas in China were 162.964 billion cubic meters, up 4.9% year on year. Mainly due to increased natural gas sales and lower procurement costs of imported gas, the natural gas sales business achieved operating profit of RMB 25.268 billion, an increase of 29.74% over the previous year.

Focus on shareholder returns, and there is still room for repair in valuations. In 2023, the company's cash dividend ratio was 50%, with a total dividend payout of about 80.529 billion yuan, a record high. The company's dividend for the first half of 2024 was approximately RMB 40.265 billion, a record high for the same period. If the 2023 dividend ratio remains unchanged at 50% in 2024, according to the profit forecast, corresponding to the closing price on November 1, 2024, CNPC's dividend ratio will reach 5.78%, which has a high allocation value. Furthermore, in the past two years, in the energy sector of central state-owned enterprises represented by three barrels of oil, stock prices and corporate valuations have increased markedly in the context of ensuring energy security and the transformation of new energy sources. However, in comparison with domestic non-state-owned enterprises in the same industry and overseas enterprises in the same industry, the current valuation is still relatively low. As the profitability gap between central state-owned enterprises represented by three barrels of oil gradually narrows, the valuations of leading central state-owned enterprises such as CNPC still have significant prospects of improving, and valuations may continue to be repaired.

The company's 2024-2026EPS is expected to be 0.96 yuan, 1.03 yuan, and 1.06 yuan, respectively. The PE corresponding to the closing price on November 1, 2024 was 8.66X, 8.07X, and 7.81X, respectively, maintaining a “buy” rating.

Risk warning

1. The sharp drop in international oil prices;

2. Geopolitical risks.