Data:2009-12-12 2:34
Category: Money Tips Date: 2007-04-09
Maintain Outperform rating. According to the company operational data to adjust our model, we basically maintain their profit forecasts unchanged. Although, taking into account the valuation of global oil stocks declined, we will target price slightly lower, but we still maintain the right Sinopec A, H shares Outperform rating.
Oil and gas production better than expected. According to China's Sinopec to the latest operational data, in 2006 output of crude oil and natural gas increased by 2% and 16% to 2.85 million barrels and 2,560 billion cubic feet, higher than our forecast of 0.6% and 2.9% higher. Substantial oil and gas production growth was mainly due to new capacity in Northwest China.
The retail volume of refined oil products with total domestic sales were up 7% and 14% to 7,200 million tonnes and 112 million metric tons, respectively, 1.9% higher than we expected and 1.2%.
Light oil yield declined slightly. While crude oil processing volume increased by 5% year on year to 146 million tonnes, 0.6 percent higher than we expected, but the light oil yield from 75.5% in 2005 to 75.2%. Is still our first choice in that section of the stock. According to the company operational data to adjust our model, we basically maintain their profit forecasts unchanged. Taking into account the refining business, to reverse, we believe that Sinopec's earnings growth in 2007 should reach the highest level of domestic oil companies, so we are still better than the big city to maintain its rating. Although, because the market worried about oil prices will further decline in the short term, investor sentiment on the stock may be a bit negative, but we believe that refined the negative impact of lower oil prices will be offset by the impact of falling oil prices.
Taking into account the valuation of global oil stocks declined, we will be H shares target price lowered slightly from 7.75 Hong Kong dollars to 7.68 Hong Kong dollars (equivalent to nine times the 2007 price-earnings ratio). For the A shares, we will also lower the target price to 9.98 yuan, still higher than the target price premium to H shares of 30%.
