\u3000\u3000 China Petroleum & Chemical Corporation(600028) (600028)
Event: on January 27, 2022, the company issued an announcement on the advance increase of performance in 2021. It is expected that the net profit attributable to the parent company will increase by RMB 34-40 billion year-on-year in 2021, with a year-on-year increase of + 103% – 122%; It is estimated that the net profit deducted from non-profit will increase by RMB 66-75 billion over 2020. After the adjustment of related party transactions, it is expected that the net profit attributable to the parent company in 2021 will increase by RMB 33.5-39.5 billion compared with the same period of the previous year, with a year-on-year increase of + 101% – 119%; Net profit after deduction of non attributable assets increased by RMB 66-75 billion compared with the same period of last year.
Benefiting from the rise of oil price, the profit reached a new high. In terms of oil price, according to Wande data, the average price of Brent crude oil in 2021 was $70.94/barrel, a year-on-year increase of + 64.17%, and the average price of WTI crude oil was $68.10/barrel, a year-on-year increase of + 72.52%. In terms of output, in 2021, the company achieved oil and gas output of 479.67 million barrels of oil equivalent, a year-on-year increase of 4.5%; The crude oil processing volume was 255.28 million tons, a year-on-year increase of + 7.75%; Gasoline, diesel and kerosene in refined oil were + 12.61% / – 5.32% / + 3.78% year-on-year, and ethylene / synthetic resin / synthetic fiber / synthetic rubber in basic petrochemical products were + 10.95% / + 9.38% / + 3.35% / + 17.34% year-on-year respectively. With both volume and price rising, the company’s profit achieved high growth, reaching a new high in recent ten years.
In 2022, we are optimistic that the continuous rise of oil prices will bring about the improvement of performance. In the short term, due to the geopolitics of the conflict between Russia and Ukraine, the weakening influence of Omikron and the decline of U.S. crude oil inventory, the driving force of short-term crude oil price rise is still strong; In the long run, driven by the reduction of global upstream investment in oil and gas and the gradual recovery of national economies after the epidemic control, we believe that the crude oil price center is expected to continue to rise in 2022, thus promoting the profitability of the company’s oil and gas sales business.
Actively promote low-carbon business. (1) Comprehensively promote the increase of oil and gas reserves and production, actively promote the development of low-carbon energy such as natural gas, shale gas and combustible ice, and significantly improve the gas oil ratio. (2) Accelerate the intensive and green development of refining and chemical business, and build a number of world-class refining and chemical integration bases. By 2025, the average scale of a single plant is expected to reach more than 10 million tons / year. (3) We will intensify efforts to promote the transformation from oil refining to chemical industry, and put the concepts of “oil production and chemical”, “oil transformation” and “oil to special” through the whole process research of the integrated refining and chemical planning project. (4) Accelerate the development of high-end industries such as new materials and degradable plastics, create a new model of plastic circular economy and reduce the carbon footprint of products in the whole life cycle.
Layout the hydrogen energy industry chain and CCUs business. In terms of hydrogen energy, the company takes hydrogen energy as the core and actively constructs a variety of green energy supply systems such as hydrogen energy, wind energy, Cecep Solar Energy Co.Ltd(000591) , geothermal energy and so on; It is planned that by 2025, the company will build 1000 hydrogenation stations or oil hydrogen mixing stations, more than 5000 charging and replacement power stations, add 50 million square meters of medium and deep geothermal heating area, and strive to achieve 10 million tons of standard coal in terms of new energy supply capacity. For CCUs business, the first million ton CCUs project in China – Qilu Petrochemical Shengli Oilfield CCUs project built by the company has started construction, and strive to build two million ton CCUs demonstration bases.
Investment suggestion: according to the company’s performance forecast, adjust the net profit attributable to the parent company from 2021 to 2023 to 68.9/80.4/81 billion yuan, and the PE corresponding to the closing price on January 27, 2022 is 7 / 6 / 6 times. Considering the rising trend of oil price, the improvement of profitability and the layout in the new energy field, maintain the “recommended” rating.
Risk warning: the risk of crude oil price falling or fluctuating; Risk of falling prices of major petrochemical products.
