[ET Net News Agency, 11 September 2019] HSBC Global Research lowered its target price
for Sinopec (00386) to HK$6.35 from HK$6.68 and maintained its "buy" rating.
The research house said Sinopec's upstream operation has high-cost structures and is
relatively uncompetitive compared with peers. Overall oil and gas production has
contracted over the last four years - particularly crude oil production as assets with
high costs were written down or decommissioned.
HSBC views the shares as trading below their fair value. Over the forecast horizon, HSBC
sees fundamental support for closing the gap to the fair value, including moderating PE
multiples below 10x, stable ROE, strong free cash flow yields, and a generous capital
return policy, producing a 7-8% dividend yield in 2019-21. (KL)