occurrences

Sinopec released its 2024 semi-annual report on August 25, 2024. 1H24 achieved operating income of 1576.131 billion yuan, a year-on-year decrease of 1.10%, and realized net profit to mother of 35.703 billion yuan, an increase of 1.69% over the previous year.

Among them, 2024Q2 achieved operating income of 786.184 billion yuan, a year-on-year decrease of 2.02%% and a month-on-month decrease of 0.48%, and 2024Q2 achieved net profit of 17.387 billion yuan to mother, an increase of 15.84% year-on-year and a decrease of 5.07% month-on-month.

Q2 Oil prices rose month-on-month, and upstream oil and gas production increased. The company continued to respond to calls to increase storage and production, and maintained a high level of exploration and development capital expenditure. 1H24's capital expenditure for exploration and development reached 33.788 billion yuan, an increase of 1.10% over the previous year. 1H24's crude oil production reached 0.141 billion barrels, up 0.61% year on year, and natural gas production reached 700.57 billion cubic feet, up 6.01% year on year. Meanwhile, the average price of 2024Q2 Brent crude oil was $85.03 per barrel, up 9.39% year on year and 4.00% month on month.

The performance of the refined oil sales segment continues to be steady

Consumption demand for 1H24 refined oil products continued to be strong. In January-July, the apparent consumption of refined oil products reached 0.227 billion tons, an increase of 5.75% over the previous year. 1H24's crude oil processing volume reached 0.127 billion tons, up 0.12% year on year, and gasoline/diesel/aviation kerosene production reached 32.34 million tons/29.31 million tons/15.65 million tons, respectively, up 6.63%/down 8.83%/15.16% year on year, respectively. At the same time, the company's retail sales volume of 1H24 refined oil products reached 56.96 million tons, a year-on-year decrease of 4.69%, and the number of gas stations reached 30,959. The company's refined oil sales segment continued to perform steadily.

Increase the minimum dividend ratio for the whole year+A shares to be repurchased. The company's 1H24 cash dividends with rich shareholders' return on investment totaled 17.768 billion yuan, and the dividend payment rate reached 49.77%. The company's dividend ratio also remained high. The 2024 semi-annual cash dividend reached 0.146 yuan/share. Based on the closing price of August 23, 2024, the company's 1H24 TTM dividend ratio was 5.15% (1H24 TTM dividend ratio = (dividend per share at the end of 2023+dividend per share in the mid-2024 period) /closing price on August 23). At the same time, the company announced the 2024-2026 shareholder dividend return plan. Under the conditions that the parent company's net profit achieved in that year was positive, the cumulative undistributed profit was positive, and the company's cash flow could meet the normal operation and sustainable development of the company, the guaranteed dividend payment rate increased to 65%. In addition, the company plans to use 0.8-1.5 billion of its own funds to repurchase A shares and cancel them all. The company has high dividends and increases the minimum dividend ratio+A shares plan to be repurchased, and the return on shareholders' investment is rich.

Profit Forecasts, Valuations, and Ratings

We believe that under the premise that crude oil prices remain stable, the company's profit is highly deterministic. We expect the company's net profit to be 68.3 billion yuan/70.1 billion yuan/75.2 billion yuan in 2024-2026, corresponding EPS is 0.56 yuan/0.58 yuan/0.62 yuan, and the corresponding PE is 12.2X/11.8X/11.0X, giving a “buy” rating.

Risk warning: (1) geopolitics disrupting the global crude oil market; (2) risk of price liberalization of refined oil products; (3) risk of poor terminal demand; (4) risk of overseas business operations; (5) risk of accidents; (6) exchange rate risk; (7) force majeure factors.