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China Petroleum & Chemical Corp ADR SNP

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Morningstar’s Analysis

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Sinopec’s 1H 2021 Results Better Than Guidance; Shares Undervalued With Attractive Dividend Yield

Chokwai Lee, CFA Senior Equity Analyst

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.

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Company Profile

Business Description

China Petroleum & Chemical, or Sinopec, is one of China's national oil companies and one of Asian's largest integrated oil companies in terms of revenue. Its income is derived primarily from refining and marketing of oil products and petrochemical production. Sinopec has China's largest petrol station network with over 30,000 stations and enjoys significant market share in petrochemicals. Established in 2000 by China Petrochemical Corporation, a state-owned enterprise and majority shareholder, the company also owns oil and gas assets in Shandong and Sichuan provinces. It has a smaller global upstream presence than peers PetroChina and CNOOC.

Contact
No. 22 Chaoyangmen North Street, Chaoyang District
Beijing, 100728, China, People's Republic of
T +86 1059960028
Sector Energy
Industry Oil & Gas Integrated
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 384,065

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