Event: PetroChina announced its Q3 report of 2008 today, according to which, its business turnover totaled Rmb853.658bn (+42.61% yoy), pre-tax profit to be Rmb127.015bn (-12.98% yoy), net profit attributable to its shareholders under international accounting standards to be Rmb93.5bn (-16.9% yoy), EPS to be Rmb0.51; and net profit attributable to shareholders of parent under international accounting standards to be Rmb86.602bn (-17.4% yoy), EPS to be Rmb0.47.
Our Analysis and Estimation: Domestic oil product price went up by Rmb1000/ton in June end in 2008, which mainly contributed for its performance growth of the corresponding period. However, due to American financial crisis from August onwards, international crude oil price began to fall back sharply, which in turn caused a substantial decrease in its special oil gain levy. Moreover, to integrate resource price with international practice, the Chinese government didn’t cut the oil product price when international oil prices were going through the substantial bounce. Since product oil price will be down-regulated far below that of the crude oil and international oil prices, complex refining margin will be rapidly increased.
Investment Suggestion: According to the company’s DCF-WACC model valuation, price per share goes to Rmb16.17, and reasonable price per share is within Rmb15.15-Rmb17.41. 2008 P/E ratio is at 13.65x, and 2009 at 10x. Under current situation, we do not absolutely deem the 10x P/E ratio in 2009 to be comparatively high, especially when absolute valuation shows a rather low price of the A share for the time being. Furthermore, advancement of exploration technique ushered domestic oil & gas field into a discovery summit, and oil & gas replacement rate in the company is growing rapidly. As a result, the company deserves a comparatively high valuation. We hereby give rating of “Recommended” for the counter.
Five Favorable Factors for PetroChina in 2009: 1) Special oil gain levy of the company dropped with expedition as international oil price down-regulated; 2) Current international oil price earns the company most profits for the time being; 3) Oil price of 50-90 USD/barrel is most favorable for complex refining margin and boost of some chemical products; 4) Gas & oil replacement above 1 and keep surging, and 5) Cut in loan benchmark interest rate forced its financial cost to fall.