Sinopec Earnings: Hit by One-Off Items; Dividend Payout Intact

Sinopec’s 2023 net profit of CNY 58.3 billion, down 13% year on year, was below our expectation, largely due to impairment losses and a one-off levy for mineral rights concessions of CNY 7.4 billion. Meanwhile, operating statistics for 2023 including oil and gas output, refinery throughput, ethylene production, and domestic sales volume of refined oil products were in line with our expectations. We maintain our fair value estimate of HKD 5.60 per H-share (CNY 5.10 per A-share) after considering our latest energy price and foreign exchange assumptions. We think Sinopec’s H-shares are currently undervalued, supported by its attractive 2024 dividend yield of more than 8%.