The Q3 performance was in line with expectations: the company achieved operating income of RMB 702.41 billion in Q3, a decrease of 12.5% year on year; realized net profit to mother of 43.91 billion yuan, a decrease of 5.3% year on year. In the first three quarters, the company achieved operating income of 2256.28 billion yuan, a year-on-year decrease of 1.1%, and realized net profit to mother of 132.52 billion yuan, an increase of 0.7% over the previous year. The change in performance was mainly due to the decline in oil sales revenue and profit due to the rise and fall in oil prices, the narrowing of profits in the refining and sales sector, and the increase in sales revenue in the chemical and natural gas business.

Oil and gas and new energy business: In the first three quarters of 2024, the oil and gas sector achieved operating profit of 144.3 billion yuan, an increase of 8.7% over the previous year. Oil and gas equivalent production in the first three quarters was 1,342 million barrels, up 2% year on year, including 3666.9 billion cubic feet of natural gas, up 4% year on year. Crude oil achieved a price of $76.88 per barrel in the first three quarters, up 2.1% year over year.

Refining and new materials business: In the first three quarters, the company showed a trend of declining profits in the refining and chemical sector and increasing profits in the chemical sector. The company's crude oil processing volume was 1036.2 million barrels, down 0.7% year on year, and gasoline production from refined oil products was 89.9 million tons, a decrease of 2.7% year on year. Diesel production was 39.936 million tons, down 8.6% year over year. Kerosene production increased significantly, reaching 13.534 million tons, a year-on-year increase of 23%. In the first three quarters, commodity production of chemical products reached 28.643 million tons, an increase of 9.7% over the previous year.

Sales business: The operating profit of the company's sales segment in the first three quarters was 12.9 billion yuan, a year-on-year decrease of 25%. Domestic consumption of refined oil products was divided, with gasoline sales of 37.963 million tons, a year-on-year decrease of 3.7%. Diesel sales were 43.209 million tonnes, down 6.3% year over year. Kerosene sales increased 10% to 8.424 million tons. The company adjusted its sales strategy, reduced the number of gas stations by 225 to 22530, and actively laid out the charging pile business.

Natural gas business: The operating profit of the company's natural gas sales business in the first three quarters was 25.3 billion yuan, an increase of 30% over the previous year. The company's natural gas sales volume was 162.96 billion cubic meters. The company continuously reduced comprehensive procurement costs, optimized the natural gas resource pool, and the profitability of the sector continued to increase.

The target price is HK$7.03, giving a buying rating: We estimate that the company's revenue for 2024-2026 will be 3.1 trillion yuan/3.11 trillion yuan/3.16 trillion yuan, respectively; net profit to mother will be 172.6 billion yuan, 180.1 billion yuan, and 186 billion yuan, respectively. We gave the company 7 times the PE valuation in 2024, with a target price of HK$7.03, with room for an increase of 26.6% from the current price, and gave it a buy rating.