PetroChina’s net profit fell 4% YoY to RMB157.3bn in 2025, in line with our forecast. The growth at all its downstream segments largely offset the earnings decline at upstream operations. We forecast its earnings to surge 25% YoY in 2026 as we expect the average price of Brent to surge 19% YoY to US$81/bbl. Although part of its overseas upstream operations and oil and gas supply are disrupted by the war in the Middle East, its extensive international trading network will ensure sufficient oil and gas supplies for its downstream operation. Reiterate BUY with target price of its H shares lifted to HK$12.12.

Key Factors for Rating

The operating profit of its oil, gas and new energies segment dropped 15% YoY to RMB136.1bn in 2025 on 14% YoY decline in realised oil price. Nevertheless, this was largely offset by the higher profits at all its downstream segments. This included margin improvement for its refining business and efficiency gains and higher trading profit for its marketing segment.

More importantly, the operating profit of its natural gas marketing segment grew 13% YoY to RMB60.8bn in 2025. This business benefited from the 6% YoY growth in domestic gas sales volume (way above the 0.1% YoY growth of China’s apparent demand), decent growth in its domestic gas output, lower cost of imported gas through improvement in procurement mix and effort to increase realised gas price. In particular, the average cost of imported gas dropped 7% YoY and the loss on imported gas narrowed 55% YoY to RMB4.5bn.

We expect the company’s profit to surge 25% YoY in 2026. With the average price of Brent forecast to surge 19% YoY to US$81/bbl, we expect higher earnings for all segments. The upstream segment will benefit from higher oil price whereas we expect higher margins for refining, chemicals and new materials segments and marketing segment. The natural gas sales marketing segment should benefit from decent growth in sales volume.

Key Risks for Rating

Sharp fall in oil price.

Higher-than-expected costs.

Valuation

We increase our target price for its H shares from HK$11.62 to HK$12.12 to reflect the increase in our dividend forecasts. We roll over our target valuation from average 2025-27E dividend yield of 4.8% to 2026-28E.

We also lift our target price for its A shares from RMB13.68 to RMB14.22. We still base our target price on its 3-month average A-H premium which is at 33%.