Shanghai Petrochemical (600688): Maintain Shanghai Petrochemical’s H-share “dodge” rating; dividends and 1Q19 results may be lower than expected
Company status: Shanghai Petrochemical H-shares’ earlier low (3.
(Caused by 4) rebounded by 18%, mainly because the market expected considerable dividends in FY18 and FY19 results increased, but we hold different views.
We expect FY18 net profit to reach 20% to US $ 4.9 billion, corresponding to 4Q18 net profit of only 2.
The company will announce FY18 results on the evening of March 19.
The market expects that the company’s dividend in FY18 杭州夜网论坛 may be flat or several times, we think the market may be too optimistic.
We do not rule out that in the case of the company’s overall profit decline in FY18, maintain a dividend payout ratio of 53% in FY17, that is, pay a nominal 0.
The possibility of a return of 24 yuan; if so, the FY18 dividend payout may fall by 20%, and then the current market expectations.
In addition, we expect the refining business to continue in January 2019, and the gross margin of chemicals may further deteriorate.
Therefore, we don’t think the company’s profit will recover as scheduled.
We expect the company to barely make a profit in 4Q18, and it is still difficult to see a profit in 1Q19.
Differences between reviews and Sinopec.
It seems controversial that we give “Recommended” rating to Sinopec, which is also listed as a refinery company, but “Evasive” rating to Shanghai Petrochemical Hong Kong shares.
We believe that the biggest difference between the two companies is that investors holding Sinopec mainly value the performance of the company’s relative index, while holding Shanghai Petrochemical cares about absolute returns.
In addition, Sinopec has an integrated and complete industrial chain, which eases the impact of oil price fluctuations; however, Shanghai Petrochemical is not always in such a condition.
We suggest that investors “shoulder” Shanghai Petrochemical H shares at the moment.
Estimates suggest that we maintain our profit forecast and maintain Shanghai Petrochemical’s H-share “escape” rating and target price3.
2 builds, corresponding to 0.
9 times the 2019 P / B ratio, 20% downside compared to the current previous one.
Maintain Shanghai Petrochemical A shares “Neutral” rating and target price 5.
2 yuan, corresponding to 1.
8 times the 2019 P / B ratio, which is basically close to the current continuous.
The current Shanghai Petrochemical A / H respectively correspond to 1.
9 times / 1.
2x 2019 P / B ratio.
Risks Oil prices fluctuate, refining gross margin and chemical gross margin narrow.