Citi: Maintains "Buy" Rating on PETROCHINA (00857) and HK$12 Target Price; Natural Gas Procurement Advantage Supports Q4 Earnings

Citi issued a research report stating that PETROCHINA (00857)'s third-quarter results were in line with expectations, with net profit of RMB51.8 billion, down 7% quarter-on-quarter and up 22% year-on-year; first three quarters' net profit has reached 83% of the bank's full-year forecast. During the period, the natural gas marketing segment's EBIT grew 76% quarter-on-quarter but fell 27% year-on-year, possibly affected by widening losses on imported natural gas and weak demand. Domestic natural gas sales volume in the third quarter rose only 0.8% year-on-year. The bank maintains its "Buy" rating and HK$12 target price, and is optimistic about the company's attractive dividend returns and good short-term earnings visibility. In the third quarter, the exploration and production segment's EBIT fell 13% quarter-on-quarter and rose 29% year-on-year, which Citi considers in line with expectations. During the period, the realized oil price was US$79.8 per barrel, down 11% quarter-on-quarter. The bank expects that the Minas benchmark crude oil price has risen about 16% since October compared with the third quarter, and believes the company's fourth-quarter earnings will remain stable. Citi noted that even as the cost of pipeline imported natural gas rises, the high cost of liquefied natural gas (LNG) imports still gives PetroChina a procurement advantage, and it expects its natural gas marketing business to maintain market share.