Company profile

PetroChina is the largest oil/gas producer and supplier in Chinese oil/gas industry, specializing in prospecting, developing and producing of crude oil and natural gas, refining of crude oil, petroleum and chemical products as well as transmission and selling of crude oil, finished oil and natural gas.

Investment summary

In 2012, the Company recorded a total business income of RMB 2.195296 trillion, 9.6% up as compared with the amount of RMB 2.003843 trillion in 2011; the net profit attributable to shareholders of the parent company dropped from RMB 132.961 billion in 2011 to RMB 115.326 billion, 13.3% down on YoY basis.

In 2012, the performance of Company was lower than our expectation. Growth of business income benefited from growth of key product sales of oil and natural gas and increase of sales price. However, increase of natural gas import, price inversion of import sales and lagging of domestic finished oil price adjustment were still key reasons of net profits falling.

We believe that with continuous recovery of global economy, crude oil demand will keep continuous growth. Additional issuance of currency globally and geopolitical issues will also drive up international crude oil price and benefit upstream business of the Company. For domestic finished oil market, price adjustment period of finished oil is gradually narrowing, and refining business of the Company has achieved significant loss reduction as compared with 2011 and will keep improving. For natural gas and pipeline business, the Company is still firmly holding majority of the shares of the domestic natural gas market. The 12th Five-Year Plan also clearly promises to keep encouraging use of natural gas. Therefore, favorable effect of the Company's earlier input will gradually appear. It is expected that the price inversion of import sales will also achieve constant improvement.

Generally, affected by declining performance, short-term market performance of the Company falls behind the expectation. However, for a mid/long run, prospect of the Company's main business is still favorable with large potential of future growth. In conclusion, we will continue to raise 6-month target price of the Company to HKD 12.67, equivalent to 14 times of PE ratio in 2013 and the 6-month overall yield rate may reach 27.2%, so we give the rating of “buy”.

Financial Predications

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