Sinopec (600028): 1Q19 results were better than expected without being affected by inventory

Sinopec (600028): 1Q19 results were better than expected without being affected by inventory

1Q19 results were better than expected Sinopec announced that net profit attributable to its mothers under the IAS 19 in the first quarter fell by 20% to 15.5 billion U.S. dollars, better than our expectations of 14 billion U.S. dollars and between 12 and 14 billion U.S. dollarsAlways expected.

Considering that the company’s 1Q19 performance achieved the positive impact of inventory gains, 成都桑拿网 we believe that the performance is indeed better than our battle expectations.

The main highlight of the operation is the exploration and development sector. The growth of the sector’s performance is mainly due to the higher realized price of natural gas and the full cost of crude oil extraction.

According to our calculations, the full cost of 1Q19 crude oil extraction has replaced about 54.

USD 5 / barrel, a significant decrease from the level of USD 62 / barrel in 2018.

This trend is in line with the company’s goal of replacing the full cost of barrel oil at $ 50 / barrel in 2020/21.

Cash flow from operating activities in the first quarter of 19 was negative. Historically, it was rare. However, it was mainly because the company paid part of the deferred taxes at the end of last year and the working capital was affected by rising oil prices.

Cash from regular operating activities should still be a net inflow, and we don’t think investors need to overdistribute.

The performance of the chemical sector improved month-on-month, but it still experienced an 18% drop.

However, it is worth mentioning that the sales volume of chemical products in the first quarter of 19 increased significantly14.

3%, showing the company’s decisive market share in the sales channel of chemical products.

This will also help the company to better counter the impact from new capacity in the future.

Gas prices are expected to remain flat after the development trend enters April.

We expect that the company is expected to extend the gas price realized in this heating season to the non-heating season, thereby increasing the gas price each time in the non-heating season.

This trend is consistent with the industry.

Fundamentals are solid but short-term catalytic or limited.

Although the company is facing the impact from the successive launch of new domestic production capacity, we believe that at the current oil price level of about $ 70 / barrel, the company’s integrated business layout has alternative anti-cyclical and anti-risk capabilities.

Of course, we have not yet clearly identified the factors that may catalyze the company’s estimated improvement. In the short term, the company’s merger may continue to change at the current forecast level based on the expected changes in quarterly results.

Earnings forecast We maintain our earnings forecast unchanged.

Estimates and recommendations are optimistic about the company’s ability to resist restructuring brought about by the integration of production and sales, and maintain A / H stock recommendations.

Maintain A / H shares 7 according to segment assessment method.

RMB 3/7.

5 HKD target prices, corresponding to 29% / 25% upside.

A / H shares are currently trading at 0.

9 times 2019 P / B ratio.

Risks Oil price fluctuations, refining / chemical wool further increase.