PETROCHINA(601857)：REITERATE BUY ON H SHARES A SHARES NO LONGER ATTRACTIVE

　　The net profit of PetroChina grew 12% YoY to RMB43.6bn in 1Q23, 31% above our forecast. The oil, gas & new energy, marketing and natural gas sales segments all beat our expectations. With upstream accounting for the bulk of its profit, we expect the company to benefit from the expected stronger oil price in 2H23. We increase our 2023-25 earnings forecasts by 10-12% to reflect the higher-than-expected earnings of the above-mentioned three segments. We reiterate our BUY call on its H shares with target price increased to HK$5.95.
　　Key Factors for Rating
　　Despite the 12% YoY fall in realised oil price, the operating profit of the oil, gas & new energy segment still grew 6% YoY to RMB41bn in 1Q23 on 5% YoY increase in oil output, 3% YoY fall in lifting cost and likely increase in gas price.
　　The operating profit of the marketing segment jumped 79% YoY to RMB8.2bn in 1Q23 as the company did well in international trading.
　　The operating profit of the natural gas sales segment improved 13% YoY to RMB10.1bn in 1Q23. The full-period impact of much higher winter downstream gas price and the peaking off of imported piped gas price enable the company to recover from a loss of RMB2.7bn in 4Q22.
　　We expect higher oil price in 2H23 as global oil market will see supply shortfall as demand picks up and OPEC+ cut output. With upstream accounting for the bulk of its earnings, PetroChina should see stronger earnings ahead although it will be partly offset by higher costs to be booked in 4Q23.
　　We raise our 2023-25 earnings forecasts by 10-12%, mainly to reflect the higher-than-expected profit of the upstream and natural gas sales segments. In particular, we lift our forecasts for oil output by 0.2-0.7%, realised oil price by 0.7-0.8%, realised gas price by 4% and lower our lifting cost forecasts by 5%.
　　The company’s H shares look attractive at 5.7x 2023E P/E. While its 2023E dividend yield of 7.9% is not very high, it can raise its 45% regular payout ratio after it broke the rule for the first time in 2022 （to 52%）。
　　Key Risks for Rating
　　Sharp fall in oil price.
　　Lack of improvement in profitability of refining and chemicals operations.
　　Valuation
　　We raise our SOTP NAV from HK$9.54 to HK$10.62 to reflect the increases in earnings forecasts and its oil and gas reserves. Hence, we lift our target price for its H shares from HK$5.34 to HK$5.95. We still set our target price at a 44% discount （mean since early 2016） to our NAV. This is equal to 6.2x 2023E P/E.
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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。