ZHONGTAI SECURITIES·2024-02-19 16:00Investment Rating - The report assigns a "Buy" rating for Sinopec (600028.SH) [2] Core Views - Sinopec is a state-owned enterprise with a strong focus on midstream and downstream refining and sales, demonstrating resilience through oil price cycles. The company has achieved a revenue and net profit CAGR of approximately 12% and 8% from 2001 to 2022, respectively, with a stable ROE around 11% [6] - The company emphasizes shareholder returns, achieving a dividend yield exceeding 8% in 2022 [6] - The report anticipates stable performance across four business segments under a high oil price environment, with exploration, refining, marketing, and chemical sectors all contributing positively [6] Summary by Sections Company Overview - Sinopec is a world-class integrated petrochemical giant, with the largest refining capacity in China and second-largest globally. The company has a comprehensive sales network, ranking second in the world for the number of gas stations [12][15] - The company is controlled by the State-owned Assets Supervision and Administration Commission (SASAC), holding 67.6% of the shares [15][18] Business Segments Performance - Exploration: The company achieved an oil and gas equivalent production of 376.15 million barrels in the first three quarters of 2023, a year-on-year increase of 3.6% [6] - Refining: The refining business maintains a gross margin above 20% when oil prices are between $40 and $80 per barrel, benefiting from a robust pricing mechanism [6] - Marketing: The sales of refined oil are a significant revenue source, with expectations for continued growth in consumption driven by macroeconomic improvements [6] - Chemicals: The company is transitioning towards high-value new materials, with ongoing projects expected to contribute positively in the coming years [6] Valuation Insights - The report suggests that the intrinsic value of Sinopec has improved due to ongoing reforms and management enhancements, with a focus on high-value product development and technological innovation [6] - The company's current PB ratios are lower than those of private refining leaders and international petrochemical giants, indicating potential for valuation recovery [6] - The dividend policy has been robust, with a payout ratio consistently above 50% since 2014, and a TTM dividend yield of 5.7%/9.2% as of February 8, 2024 [6] Profit Forecast and Investment Recommendation - The forecast for net profit from 2023 to 2025 is 728.63 billion, 784.18 billion, and 843.05 billion yuan, respectively, with corresponding EPS of 0.61, 0.66, and 0.71 yuan [6] - The report concludes with a "Buy" rating, highlighting the company's strong defensive value in a low-interest-rate environment and the potential for valuation reappraisal [6]