PETROCHINA(601857)：HIGHER PAYOUT;PROPOSES FIRST EVER SHARE BUYBACK

PetroChina’s net profit surged 62% YoY to RMB149.4bn in 2022, in line with its guidance and our forecast. Looking ahead, we expect its earnings to drop 8% YoY in 2023 mainly on lower E&P earnings. The most attractive point of the results is its first ever increase in regular payout ratio and share buyback proposal since its listing. Its share price surged 8% yesterday. We reiterate our BUY call with target price increased to HK$5.34.
Key Factors for Rating
The 1.4x YoY jump in the operating profit of the E&P segment on higher oil price was the key driver for the company’s strong profit growth. This more than offset the sharp fall in profit of the chemical operations and natural gas marketing segment. The latter was hit by a lack of disposal gain (RMB18.3bn in 2021) and higher loss on imported gas in 2022.
The company’s core earnings were even stronger as it booked an RMB20bn loss from asset disposal at the E&P segment in 2022.
For 2023, we expect the company to see 8% YoY fall in net profit, mainly on lower E&P earnings as a result of lower oil price.
The major positive surprise was the increase in regular dividend payout ratio from 45% in 2021 to 52% in 2022. The company has stuck with 45% regular payout since its listing 23 years ago. While it did pay more than this level during low oil price period, the extra was in the form of special dividend. This is the first time it raises the regular payout.
The company is going to seek the approval from shareholders for the general mandate of share buyback. Given the examples of its peers, the company may really buy its own shares in the market.
Key Risks for Rating
Sharp fall in oil price.
Lack of improvement in profitability of downstream operations.
Valuation
We increase our SOTP NAV from HK$8.88 to HK$9.54 after rolling over the base year to 2023. Hence, we raise our target price for its H shares from HK$5.05 to HK$5.34. Our target price is equal to a 44% discount (average since early 2016, up from 43.2% previously) to our NAV. This is equal to 6.2x 2023E P/E.
We nevertheless cut our target price for its A shares from RMB7.98 to RMB6.93.
We still set our target price based on its average 3-month A-H premium which has narrowed from 71% to 48% since late October 2022.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。