Incident: According to the company's 2024 three-quarter report, 2024Q1-Q3 achieved revenue of 2256.279 billion yuan, -1.13% year over year; net profit to mother of 132.518 billion yuan, +0.66% year over year; net profit after deducting non-return to mother of 135.224 billion yuan, +0.49% year over year. In a single quarter of 2024Q3, the company achieved revenue of 702.41 billion yuan, -12.45% YoY; net profit to mother was 43.911 billion yuan, or -5.31% YoY.

Comment:

2024Q3, against the backdrop of weakening oil prices, the company's performance still achieved contrarian growth from month to month. Due to factors such as US macroeconomic recession expectations, Trump's election expectations, and OPEC+ resumption of production expectations, 2024Q3 oil prices dropped significantly. According to Wind data, the average settlement price of 2024Q3 Brent crude oil futures was 78.69 US dollars/barrel, -7.63% month-on-month; according to Shenwan's industry classification (2021), the total net profit attributable to the mother of the 2024Q3 petroleum and petrochemical sector listed companies was -15.0% month-on-month. Against the backdrop of a month-on-month decline in oil prices and sector profits, Q3 achieved net profit to mother of 43.911 billion yuan. +2.29% month-on-month, which is one of the few companies in the petroleum and petrochemical sector that achieved performance against the month-on-month increase in oil prices.

Exploration and development and natural gas sales contributed to major profit increases. By sector, (1) the oil and gas and new energy sector continued to remain steady: the 2024Q3 oil and gas sector achieved operating profit of 52.6 billion yuan, +5.42 billion yuan year on year, and +3.91 billion yuan month-on-month, highlighting operational resilience; (2) domestic gas sales achieved a sharp rise in volume and price: 2024Q3 achieved a sharp rise in domestic gas sales of +2.8% year over year, and sales price +9.2% year over year, achieving rapid increase in volume and price, combined with reduced procurement costs and optimization of domestic development and customer structure, naturally The profit performance of the gas sector was impressive. 2024Q3 achieved operating profit of 8.46 billion yuan, +3.11 billion yuan year-on-year, and +3.97 billion yuan month-on-month; (3) The chemical sector increased production and sales of efficient chemical products and new chemical materials:

The gross profit of 2024Q3 refining products declined, achieving operating profit of 1.28 billion yuan, -7.89 billion yuan; the chemical sector increased production and sales of high-efficiency chemical products and new chemical materials, and continued to promote business transformation and upgrading. 2024Q3 ethylene/synthetic resin production was +14.6%/+11.2% YoY, and the chemical sector achieved operating profit of 0.37 billion yuan, +27.7% YoY, superior to the overall performance of the industry; (4) Refined oil sales sector: Affected by sluggish demand, profits were under pressure to achieve Operating profit was 2.8 billion yuan, -0.55 billion yuan month-on-month.

Steadily promote stable oil and gas expansion, refining and chemical transformation and upgrading, and firmly optimistic about the company's long-term investment value. Looking ahead, on the upstream side, we believe that demand for crude oil will continue to grow steadily, and OPEC+'s medium- to long-term production reduction synergy is still guaranteed. We expect the oil price center to remain at $70 per barrel in 2024Q4 and 2025. At the same time, the company continues to promote stable oil and gas growth. 2024Q3's oil and gas equivalent output was 0.437 billion barrels, +3.6% year over year, of which crude oil production was 0.234 billion barrels, +0.8% year over year; 1.22 trillion cubic feet of natural gas can be produced and sold, +7.0% year over year. On the midstream and downstream side, the company dynamically adjusts the product structure according to market demand, maintains high-load operation of high-efficiency chemical plants such as aromatic hydrocarbons, increases the development of new products, and increases production and sales of high-efficiency chemical products and new chemical materials. According to the company's official website and semi-annual report, construction of the Blue Ocean New Materials Project began at the end of September. Projects such as the Jilin Petrochemical Company refining and chemical transformation and upgrading project and the Guangxi Petrochemical Company's integrated refining transformation and upgrading project continue to advance, and the profitability of the refining and chemical business is expected to further improve.

Investment advice: We expect the company to achieve net profit of 170.021/181.377/186.741 billion yuan in 2024-2026, corresponding PE of 8.89X/8.33X/8.10X, covered for the first time, with a “buy” rating.

Risk warning: Demand falls short of expectations, risk of oil price fluctuations, performance forecasts and valuations falling short of expectations.