[ET Net News Agency, 11 September 2019] HSBC Global Research lowered its target price
for PetroChina (00857) to HK$5.46 from HK$6.9 and maintained its "buy" rating.
The research house said PetroChina's valuation is far below fair value and has troughed.
Short-term catalysts, including the establishment of the NatPipeCo and higher crude
prices, could lift share prices.
As China's pre-eminent supplier of hydrocarbons, in particular, natural gas, PetroChina
stands to benefit from long-term China gas demand growth. LNG import losses, a major drag
on profitability, narrowed to RMB11.2bn in 1H (from RMB13.4bn in 1H 2018).
The company's ability to pay higher dividends is supported by strong cash flow, but
rising capex may result in a normalisation of payout levels, HSBC noted. Its payout ratio
forecasts for 2019-20 is 50% as HSBC expects profitability to normalise.
HSBC trimmed its earnings forecasts to reflect the new Brent oil price assumptions and
related oil and gas realizations. Its 2019, 2020 and 2021 operating profit and net income
forecasts drop 5%, 17%, and 3%. HSBC expects PetroChina's earnings to grow 8% in 2019, 5%
in 2020, and 24% in 2021. (KL)