Analyst Note| Chokwai Lee, CFA |
We keep PetroChina’s fair value estimate at HKD 4.60 per H-share (USD 59.00 per ADR, CNY 3.72 per A-share), after incorporating our latest energy price assumptions and the weaker Chinese yuan. First-quarter 2022 net profit of CNY 39.1 billion was up 41% year on year on the back of stronger oil and gas prices. The results were largely within our expectations. Although we think PetroChina’s H-shares are undervalued, we expect sequential earnings weakness in following quarters due to challenges in the downstream segments. Our top pick in the sector remains CNOOC, given its upstream focus, cost efficiency and robust oil and gas production.