Incident: The company released its report for the third quarter of 2024. In the first three quarters of 2024, the company achieved operating income of 2366.541 billion yuan, a year-on-year decrease of 4.19%; realized net profit of 44.247 billion yuan, a year-on-year decrease of 16.46%; 2024Q3 achieved operating income of 790.41 billion yuan, a year-on-year decrease of 9.80% and a year-on-month increase of 0.54%; realized net profit to mother of 8.544 billion yuan, a year-on-year decrease of 52.15%. 50.86%

Crude oil prices remained at medium to high levels, and breakthroughs continued in the exploration field.

The company continues to increase storage and production, and oil and gas production has maintained steady growth. The company's oil and gas equivalent production in the first three quarters of 2024 was 386.06 million barrels, up 2.6% year on year. Among them, crude oil production was 211.29 million barrels, up 0.3% year on year; natural gas production was 1048.14 billion cubic feet, up 5.6% year on year. Crude oil production is relatively stable, and natural gas production is growing relatively fast. In terms of oil prices, the average spot price of Brent crude oil in the first three quarters of this year was 82.8 US dollars/barrel, maintaining a medium to high level of operation. The company's crude oil and natural gas achieved prices of 76.56 US dollars/barrel and 7.48 US dollars/thousand cubic feet respectively, +1.1% and +5.4%, respectively. Oil and gas prices have risen, breakthroughs continue in the field of exploration and development, and the sector's revenue is expected to increase steadily.

The company effectively coordinated the product structure, and sales of refined oil products continued to grow.

The company's crude oil processing volume in the first three quarters of 2024 was 0.19 billion tons, a year-on-year decrease of 1.6%. Faced with fluctuations in demand, the company adjusted the product structure and reduced procurement costs. In the first three quarters of 2024, the company produced 0.117 billion tons of refined oil products, down 0.8% year on year. Among them, diesel production declined, and gasoline and kerosene continued to grow. In terms of sales, despite facing challenges brought about by declining diesel consumption and increased penetration of electric vehicles, the company relied on sales networks and integration advantages. In the first three quarters of this year, the sales volume of refined oil products was 181.67 million tons, an increase of 0.6% over the previous year, showing operational resilience.

The chemical sector is under pressure, and capital expenditure strengthens resource advantages.

The chemical sector is still under pressure. The company adjusts plant loads according to product profitability, and production of synthetic fiber monomers, polymers, and synthetic fibers continues to grow. The company's capital expenditure reached 86.35 billion yuan in the first three quarters of this year, spending a lot in the exploration and development sector, further consolidating the company's resource advantages.

Investment advice:

We expect the company's 2024-2026 net profit to be 59.734/63.088/67.163 billion yuan, EPS 0.49/0.52/0.55 yuan, respectively, and the corresponding PE is 13/12/12 times, respectively. Considering that the company is a leading enterprise in the petrochemical field, oil and gas production is rising steadily, demand for refined oil products is picking up, and profitability continues to increase. At the same time, since its listing, the company has maintained a high dividend rate, vigorously rewarded shareholders, and maintained a high level of dividend ratio. First coverage, giving a “buy” rating.

Risk warning: Prices of chemical products have fallen, and sales of refined oil products have fallen short of expectations.