Oil Price Decline Leads to Performance Drop

In the first half of 2025, PetroChina achieved operating revenue of RMB 1.5 trillion, down 6.7% year-on-year; gross profit reached RMB 117.5 billion; net profit attributable to shareholders was RMB 84.01 billion, declining 5.4% year-on-year. The core driver of change was the decline in international crude oil prices compared to last year, with Brent crude spot prices falling 14.5% year-on-year to USD 71.87 per barrel, while accelerating competition from alternative energy sources led to contraction in oil and gas product sales revenue.

Business Structure Optimization with Steady Oil & Gas Production and Accelerated New Energy Transition

PetroChina adopted a strategy of reducing oil while increasing chemical production. Both oil & gas and new energy sectors achieved historic highs for the same period. Crude oil production reached 476 million barrels, up 0.3% year-on-year; marketable natural gas production was 2.68 trillion cubic feet, up 3.8% year-on-year; the new energy business performed exceptionally well, with wind and solar power generation surging 70.0%, and newly acquired wind and solar power indicators totaling 16.38 million kilowatts. The refining and petrochemical segment saw chemical product commodity volume increase 4.9%, with new materials production reaching 1.665 million tons, surging 54.9%.

Integration Advantages Drive Industrial Transformation and Cost Reduction

Facing oil price volatility and demand pressure, PetroChina leveraged its integrated industrial chain advantages, adhering to quality improvement and efficiency enhancement to boost cost efficiency. Unit oil and gas operating costs decreased 8.1%, while refining unit cash processing costs fell 2.2%. The natural gas sales segment's operating profit increased 10.8% due to resource pool structure optimization and increased sales volume to high-end customers. The company plans to invest RMB 9.995 billion, RMB 17.066 billion, and RMB 12.955 billion respectively to acquire 100% equity of Xinjiang Oilfield Gas Storage Company, Xiangguosi Gas Storage Company, and Liaohe Oilfield Gas Storage Company, all wholly-owned subsidiaries of the group, actively integrating business operations and promoting high-quality development of the natural gas industrial chain.

High Dividends Reshape Central Enterprise Value Benchmark

PetroChina's interim dividend payment for 2025 was RMB 40.265 billion (RMB 0.22 per share), with a dividend payout ratio of 47.94%, maintaining historically high levels and highlighting stable profitability resilience amid oil price volatility.

Target Price HK$9.11, Buy Rating

Benefiting from natural gas flexibility offsetting oil price volatility, we expect the company's operating conditions to continue improving. We forecast the company's revenue for 2025-2027 to be RMB 2,873.2 billion, RMB 2,880.0 billion, and RMB 2,936.6 billion respectively; net profit attributable to shareholders to be RMB 159.1 billion, RMB 170.4 billion, and RMB 175.7 billion respectively. We assign the company a 9x PE valuation for 2026, with a target price of HK$9.11, representing 19.7% upside potential from the current price, and give it a Buy rating.