Incident: The company released a report for the third quarter of 2024. The first three quarters of 2024 achieved operating income of 2256.279 billion yuan, a year-on-year decrease of 1.13%; realized net profit of 132.518 billion yuan, an increase of 0.66%; 2024Q3 achieved operating income of 702.41 billion yuan, a decrease of 12.45% year-on-year and a decrease of 5.30% month-on-month; achieved net profit of 43.911 billion yuan, a year-on-year increase of 2.29% .

Oil prices are operating at medium to high levels, and the steady increase in oil and gas production has helped the company's performance grow.

International oil prices remained at medium to high levels. The average spot price of Brent crude oil and the average WTI spot price for the first three quarters of 2024 were 82.79 US dollars/barrel and 77.71 US dollars/barrel respectively, up 0.9% and 0.5% year-on-year respectively. The average realized price of the company's crude oil in the first three quarters of this year was 76.88 US dollars/barrel, up 2.1% year on year; the average domestic gas sales price was 8.90 US dollars/1000 cubic feet, up 1.0% year on year. In the first three quarters of 2024, the company produced 708.3 million barrels of crude oil, up 0.3% year on year, and produced 3803.8 billion cubic feet of natural gas, up 4.0% year on year. Crude oil production is relatively stable, and natural gas has maintained relatively rapid growth. Combined with high crude oil price fluctuations, the company's crude oil exploration sector is expected to support steady growth in performance.

Crude oil processing volume declined slightly, and profits from chemical products increased significantly.

The company's refining and new materials sector achieved revenue of 923.888 billion yuan in the first three quarters of 2024, an increase of 2.3% over the previous year. In the refining part, the company processed 1036.2 million barrels of crude oil, a year-on-year decrease of 0.7%.

The company's production of major chemical products continued to grow. The total output reached 28.643 million tons, an increase of 9.7% over the previous year. The profitability of the chemical products sector improved markedly. In the first three quarters of this year, the sector achieved a profit of 3.499 billion yuan, an increase of 3.368 billion yuan over the same period last year. Affected by fluctuations in demand, sales of refined oil products declined slightly. In the first three quarters of 2024, the company sold a total of 119.886 million tons, down 4.6% from the same period last year. Among them, kerosene sales maintained relatively rapid growth, and gasoline and diesel declined.

Investment advice:

We expect the company's 2024-2026 net profit to be 177.811/189.292/196.665 billion yuan, EPS of 0.97/1.03/1.07 yuan, respectively, and the corresponding PE is 8/8/8 times. Considering that the company is a leading oil and gas company, rich in oil and gas resources, the refined oil and natural gas sales business is expected to continue to grow, and superimposed refining and chemical projects are put into operation one after another, and the company's performance is expected to continue to grow. At the same time, the company maintains a high dividend rate to protect shareholders' interests. First coverage, giving a “buy” rating.

Risk warning:

Prices of crude oil and natural gas have declined, and sales of refined oil products have fallen short of expectations.