Sinopec Earnings: Beat Expectation on Robust Upstream Earnings and Downstream Recovery

China Petroleum & Chemical Corp’s, or Sinopec’s, first-quarter 2023 net profit of CNY 20.7 billion was down 12% year on year, better than our expectation on the back of firm upstream earnings and recovery in its refining and marketing segments. After taking into account our latest energy price and foreign exchange assumptions, we raise our fair value estimate to HKD 5.50 per H-share (CNY 4.84 per A-share) from HKD 5.00 (CNY 4.40). We think Sinopec’s H-shares are currently fairly valued, with positive downstream recovery largely priced in. However, attractive 2023 dividend yield of more than 8% and the company’s share buyback plan should continue to support share prices.