高盛：Asia Pacific: Energy: Oil——Raising targets on higher norm. forecasts, new A share valuation

一.Industry context

Due to the ongoing industry cost inflation both upstream and in refining, wehave increased our valuation of the upstream and integrated oil stocks in Asia  reflect our assumption of higher normalized crude oil prices and refining margins. We raise our target prices for E&P & integrated oils by 7%-165%.

二.Source of opportunity

We affirm our Attractive coverage view of the Asian energy sector given our bullish view on oil prices and refining margins coupled with more attractive growth opportunities driven by a shift towards increased gas consumption, esp. in China and India. While we have been cautious on the prospect for downstream pricing reform in China, we now believe the fuel shortages that have arisen recently due to sharp downstream losses by independent refiners could force the NDRC to more pro-actively adjust prices going forward. We remain cautious on Indian downstream reform. On the back of our price target change, we upgrade Sinopec (SNP) H shares (0386.HK) and ADS to Buy from Neutral with a revised DCF-based 12-m target price of HK$15.1/US$194 (vs HK$8.4/US$108 previously). We also change our rating on SNP A shares (600028.SS) to Neutral from Sell based on our new market relative 12-m target price of Rmb20.5 using 22.5X 08E P/E (25% discount to GS’ A share market target multiple of 30X 08E P/E). Our fundamental valuation for SNP A is Rmb16.15 (DCF-based). We also initiate coverage of PetroChina (PTR) A shares (601857.SS) with a Sell rating due to its rich valuation. Our market relative 12-m target price is Rmb22.5 based on 22.5X 2008E P/E (25% discount to GS’ A share market target multiple of 30X 08E P/E) while our fundamental valuation is Rmb20.65 (DCF-based).

三.Risks
We believe the key risk for the sector is an economic recession which could lead to weaker demand growth and sharply lower commodity prices.
四.Best buy ideas
Our top picks among the E&P & intg oil stocks are: Citic Resources (1205.HK, Buy) and INPEX (1605.T, Buy), both on Conviction Buy List; and
Sinopec-H (Buy) and CNPC (HK; 0135.HK, Buy).
五.Best sell idea
Our only Sell-rated stock among the E&P and intg oils is PTR A shares.