Analyst Note| Chokwai Lee, CFA |
Sinopec’s first-half 2021 net profit of CNY 40.0 billion (versus first-half 2020 net loss of CNY 21.8 billion) was slightly higher than the range of CNY 36.5 billion to CNY 38.5 billion given in the profit alert in July 2021. The significant improvement was mainly attributable to higher oil prices, rapid demand recovery for refined products post-pandemic, and inventory gains. We keep our fair value estimate of HKD 5.90 per H-share (USD 75 per ADR, CNY 4.92 per A-share). We think Sinopec is currently undervalued, on the back of firm oil prices and improved downstream earnings. In addition, the interim dividend of CNY 0.16 per share indicates attractive annualized dividend yield of more than 10% for the H-shares in 2021.