[ET Net News Agency, 11 January 2021] Morgan Stanley cut its target price for Sinopec
Kantons (00934) to HK$3.31 from HK$3.4 but upgraded its rating to "overweight" from
"equal-weight".
The research house said Sinopec Kantons stock unperformed in 2020 with a 17.7%
correction in stock price (versus +3.4% for the Hang Seng Index). Its 2021 forward P/E
multiple moved down from 7.3x to 6.4x, and its 2020 forward P/B multiple also decreased,
from 0.56x to 0.50x.
Despite the laggard stock performance, Morgan noted that the stock's fundamentals have
not deteriorated. During the PipeChina reform, the stake transfer of Yuji pipeline to
PipeChina has added cash income of Rmb3.22bn to Sinopec Kantons. It believes the current
valuation of Sinopec Kantons is cheap, considering the valuation premium of Yuji Pipeline;
moreover, Morgan believes Sinopec Kantons is likely to use the proceeds from divesting its
Yuji Pipeline to PipeChina for dividend distribution. (KL)