Morningstar | PetroChina's 2018 Preliminary Net Profit Excluding One-Off Items Within Expectations; FVE Intact
No-moat PetroChina guided that preliminary 2018 net profit will increase 123%-132% to CNY 50.8 billion-52.8 billion. Stripping out nonrecurring items, earnings should increase 142%-149% to CNY 64.8 billion-66.8 billion. The results are in line with our forecast. We keep our fair value estimate of HKD 5.40 per share ($69 per ADR, CNY 4.76 per share) while our midcycle Brent oil price forecast of $60 per barrel is unchanged. We will issue an update pending more detailed information from the firm’s final results in late March.Management attributed the robust performance to several reasons, including production optimization, cost-cutting measures, and more important, the sharp recovery of oil prices. However, the significant drop in oil price in the fourth quarter has resulted in provisions for asset impairment on inventory. In addition, PetroChina also incurred losses from disposal of certain noncurrent assets (oil and gas assets and fixed assets).
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