• Buy Entry – 3.55 Target – 4.20  Stop Loss – 3.2
  • China Petroleum & Chemical Corporation is a China-based energy and chemical company. The Company’s segments include Exploration and Development segment, Refining segment, Marketing and Distribution segment, Chemicals segment, and Corporate and Others segment. Exploration and Development segment explores and develops oil fields, as well as produces crude oil and natural gas. Refining segment processes and purifies crude oil, which is sourced from Exploration and Development segment and external suppliers. The Marketing and Distribution segment owns and operates oil depots and service stations in China. Chemical segment manufactures and sells petrochemical products, derivative petrochemical products and other chemical products to external customers.
  • Oil prices are undergoing a correction at the moment due to geopolitical issues related to OPEC+. The uptrend is still intact owing to the imbalanced supply and demand dynamics. Market forecasts Brent will be higher in 4Q21 than in 3Q21 (Average: US$70/bbl vs US$67/bbl)
  • The company is one of the oil majors globally and Big Three Oil in China. Benefiting from the uptrend of oil prices, the company has turned its performance around. It reported RMB0.15 EPS in 1Q21 (the best quarter since 3Q18). The improving profitability is expected to stretch to FY22. 
  • This is a value stock as it has high dividend yield and cheap valuation. 
  • Updated market consensus of the estimated growth of EPS in FY21 and FY22 are 90.25% and 0.84% respectively, which translates to 6.0x and 5.9x forward PE. The current PE is 5.3x. The respective estimated dividend yield is 9.9% and 10.1% in FY21 and FY22. Bloomberg consensus average 12-month target price is HK$5.46.
386 HK (Source: Bloomberg)