The Zhitong Finance App learned that Damo released a research report stating that the target price was lowered from HK$5.21 to HK$5 for Sinopec (00386). Considering Sinopec's performance in the first quarter of fiscal year 2024, it was decided to reduce its net profit forecast for the 2024-2026 fiscal year by 4%, 7%, and 6%, respectively. It is mainly based on the bank's reduction in profit before interest and tax (EBIT) from Sinopec's exploration and production business to take into account the year-on-year decline in natural gas prices; and reducing EBIT in the refining sector to reflect the impact of high crude oil prices.

Damo anticipates that Sinopec's downstream business may continue to weaken, but at the same time, it believes that related business has been digested by the market. Moreover, downstream capital expenditure has peaked, and the company may increase production capacity more strictly in the medium term. At the same time, the bank believed that Sinopec's profit and dividend ratio were less volatile than its peers, and it also had a good record of maximizing shareholder returns.