Sinopec (600028): 2Q19 performance is expected to exceed market expectations; buy on dips

Sinopec (600028): 2Q19 performance is expected to exceed market expectations; buy on dips

Performance Preview We expect Sinopec’s 2Q19 results to exceed market expectations. Although Sinopec’s 1Q19 results exceeded expectations, 2Q19’s performance significantly lags behind the broader market, mainly because investors are worried that weak domestic demand for refining products may lead to weaker 2Q19 results.

However, our view is that the company’s 2Q19 performance may still be relatively strong, and it is expected that the net profit attributable to the mother will reach approximately RMB 15 billion, which is basically 佛山桑拿网 unchanged from the previous month.

  In terms of sub-sectors, we expect the company’s upstream segment to grow profitability month-on-month, and it is expected to replace the risk of profitability of the chemical sector.

  Key Points of Concern Despite the drop in oil prices, we expect the company’s earnings in the 2Q19 upstream sector to improve on a sequential basis.

The upstream sector continued to reduce costs and reduce costs and the advancement of natural gas prices is expected to become the highlight of 2Q19 results, or offset the impact of weak oil prices.

In addition, we expect the company’s LNG import reduction expectation to support upstream earnings to increase sequentially.

  Earnings in the refining and sales sectors are expected to remain flat month-on-month.

Taking into account the continued domestic oil price war and the company’s 6-month inventory loss, we expect that the company’s refining and sales revenue may not be able to improve in the short term. 2Q19 earnings may remain flat month-on-month.

We think the company’s quarterly results are expected to exceed the market’s pessimistic expectations. We judge that the current market expectation that the 2Q19 company’s refining segment and sales segment earnings may be substituted from the previous month.

  The earnings of the chemical sector are expected to be extended month-on-month, mainly due to oversupply and narrowing spreads.

Considering that the data update of the chemical industry is relatively moderate, we think the market has already expected it.

  It is recommended to focus on interim dividends.

According to the company’s articles of association, the medium-term dividend payout ratio can reach up to 50%. If the company’s medium-term payout ratio approaches the upper limit, we expect that the company may gradually generate more positive support.

At the same time, we maintain our forecast that the company’s annual dividend payout ratio may reach 80% in 2019.

We believe that the company’s high-yield investment logic is still valid and currently attractive.

  Estimates and recommendations maintain Sinopec-A / H outperform industry rating.

Maintain earnings forecasts unchanged.

Maintain Sinopec-A / H target price of RMB 7 based on segment assessment.

30 yuan and 7.

50 releases, 杭州桑拿网 corresponding to 36% and 42% upside, respectively.

Currently, Sinopec-A / H is trading at 0, respectively.

9 times and 0.

8 times 2019 P / B ratio.

  Risk oil prices fluctuate; dividends fall short of expectations