Sinopec announced financial results for the first half of 2024. In the first half of 2024, Sinopec achieved operating income of 1576.131 billion yuan, a year-on-year decrease of 1.1%; realized net profit to mother of 35.703 billion yuan, an increase of 1.7% over the previous year. Shareholders' equity attributable to the parent company at the end of the period was 828.14 billion yuan, an increase of 3.96% over the previous year.

Repurchase, high dividends, enhance recognition, and value investor returns. (1) In the next three years, the company plans to pay an annual cash dividend ratio of no less than 65% to share development results with shareholders. (2) The company plans to repurchase A shares at 0.8-1.5 billion yuan. (3) The company will focus on strengthening stakeholder communication, enhancing market recognition, and enhancing corporate value.

Exploration and extraction business: oil prices have risen, profits have increased. The average price of Brent crude oil in the first half of 2024 was $83.42 per barrel, up 4.38% year on year; at the same time, the company's oil and gas equivalent production increased by 2.97% year on year.

The same increase in price and volume drives the profit growth of the company's upstream business.

Refining business: Profits declined. In the first half of 2024, the company's refining business achieved operating revenue of 749.665 billion yuan, a year-on-year increase of 2.8%; operating income of 7.125 billion yuan, a year-on-year decrease of 37.6%.

Chemical business: There was a loss. In the first half of 2024, the company's chemical business achieved operating revenue of 257.3 billion yuan, an increase of 5.3% over the previous year; operating loss of 3.164 billion yuan was recorded. Since the second half of 2021, the company's chemical business sector has been relatively sluggish.

Marketing and distribution business: Although profits have declined slightly, they are still at normal profit levels. The company's marketing and distribution business achieved operating revenue of 14.648 billion yuan. Although profit fell 13.7% year over year, it was still within the normal profit range for the same period.

Capital expenditure situation. The company's capital expenditure in the first half of 2024 was $55.893 billion, down 25% year over year.

Among them, the capital expenditure of the exploration and mining business was 33.788 billion yuan, the same as the previous year; the capital expenditure of the chemical business sector was 8.633 billion yuan, down 71.26% year on year. The company expects to invest 117.1 billion yuan in the second half of the year, mainly in the exploration and mining (44 billion yuan) and chemical business (37.2 billion yuan) sectors.

Profit forecasting and investment advice. We expect the company's EPS in 2024-2026 to be 0.60, 0.61, and 0.63 yuan, respectively, and 6.92 yuan for BPS in 2024. Combined with comparable company valuation levels, according to 2024 BPS and 1.0-1.1 times PB, a reasonable value range of 6.92-7.61 yuan (corresponding to 2024 PE 12-13 times) was given to maintain a “superior to market” investment rating.

Risk warning: Falling oil and gas prices will affect upstream business profits; declining prosperity in the refining and chemical industry will affect the company's refining and chemical business sector profits.