China Petroleum and Chemical Corporation or Sinopec's (SNP) financial results for 2007 showed declining growth. While a number of uncertainties remain, we believe that the near- to medium-term environment supports its continued upstream production growth and downstream capacity expansion. Moreover, Sinopec's integrated petrochemical and refining businesses are expected to benefit from possible price reform for refined products in China. Overall, we think the stock is fairly valued.
On April 7, 2008, Sinopec announced its annual results for the year ended 31 December, 2007. Under International Financial Reporting Standards (IFRS), the company's turnover with other operating revenues and income increased by 13.4% to RMB 1,209.706 billion in 2007. Profit attributable to shareholders of the company rose by 5.5% to RMB 56.533 billion. EPS in 2007 was RMB 0.652 ($8.93 per ADS), compared with RMB 0.618 in 2006.
Currently, SNP ADRs are trading at 9.8x our 2008 earnings estimate, slightly lower than its global peers and lower than its Chinese peers. SNP ADRs are also trading at 8.9x our 2009 earnings estimate, lower than its global peers. Our $97.75 price objective reflects a P/E multiple of 9.4x our 2009 earnings estimate. Therefore, we are maintaining Hold recommendation for Sinopec.
Read the full analyst report on SNP.
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