DBS released a research report stating that PETROCHINA (00857) is China's largest integrated oil giant, playing a key role in advancing the nation's carbon neutrality policy and energy transition. The bank views it as the best alternative investment within the oil sector. It is anticipated that, driven by high oil prices and a recovery in downstream operations, PETROCHINA's earnings will rise this year and remain elevated, supporting its capital expenditures and dividend distributions. Based on a payout ratio of approximately 50% to 55%, the dividend yield for the next two years is projected to reach 5%. DBS has raised its earnings forecasts for PETROCHINA by 9% for this year and 1% for next year. Using a sum-of-the-parts (SOTP) valuation method, the target price has been increased to HK$12.2, with a "Buy" rating maintained.
The report highlighted that PETROCHINA's stock performance has outperformed its peers, rising over 26% year-to-date, primarily due to its more resilient and stable earnings. The bank expects oil prices to remain high at US$75 to US$80 per barrel in 2026, before moderating to US$65 to US$70 next year. Additionally, as the government pushes to phase out inefficient small-scale refineries, oversupply pressures in the downstream sector are expected to ease, leading to a gradual recovery in this business segment.
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