---
endpoint: analytics
pattern: Energy
status: done
latency_ms: 328887
conversation_id: 8c7c27ab-4240-4422-9f54-08fe0d47b499
citations: 14
created: 2026-05-31 22:21:30Z
---

# What’s the bull case bear case for PetroChina?

# PetroChina (857 HK / 601857 CH / PTR) — Bull vs. Bear Case

**Today: 31 May 2026 | CLSA rating: Outperform (H & A) | TPs: HK$8.00 / Rmb11.20 | "Most preferred" among Chinese oil majors [2]**

PetroChina has transformed from a pure oil-price proxy into what CLSA's Horace Tse calls an "all you need is yield" defensive — a story increasingly underwritten by natural gas, downstream resilience, and shareholder returns rather than crude. The case is balanced: a high-yield, low-beta integrated with structural natural-gas tailwinds, vs. a state-owned upstream-heavy major still exposed to crude oversupply and Chinese demand weakness.

---

## BULL CASE

### 1. Natural gas monetisation is finally "bearing fruit"
The structural thesis: PetroChina is now **"less reliant on its E&P segment relative to history"** because of "a revival of its natural gas business, coupled with a more resilient downstream profitability" — translating into "more steady earnings even if oil prices are under pressure" [1]. 1Q25 Natural Gas EBIT rose **+10% YoY**, driven by 4% volume growth and higher city-gate ASPs from winter residential price hikes. CLSA's view: this is the start of a "multi-year process" where past gas-infrastructure capex finally generates returns [5]. The 1Q26 print confirms the trend — natural gas sales volumes were up **+6.9% YoY to 93.9bcm**, with natural-gas-sales segment profit up **+RMB5.36bn YoY to RMB18.87bn** thanks to lower import-gas cost [12].

### 2. Best-in-class yield — and rising
2024 dividend payout was lifted **2ppts YoY to 52%** (vs. FY23 50%) — the **only Chinese oil major to raise payout** in the FY24 results season [4]. At the current price, this implies a forward **~8% dividend yield** on an 8x 25CL PE — "attractive level both relative to its own history as well as global integrated oils" [2]. CLSA's 25-27CL model holds the 52% payout flat, locking in an ~8% yield through 2027 [4].

### 3. Capex discipline frees up further cash returns
PetroChina cut its **2025 capex budget to Rmb262bn (-5% YoY)** — the **first YoY decline after three years of flat Rmb275bn spending** — leaving "more room for the company to boost its shareholder return in the form of a higher dividend payout" [3]. The 2025 annual presentation confirms execution: free cash flow grew **+15.2% to RMB120.2bn** in 2025 (4th consecutive year above RMB100bn), debt-to-capital fell to 11.2%, and operating cash flow remained **above RMB400bn for three years running** [14].

### 4. Policy tailwind on city-gate gas pricing
CLSA's catalyst list centres on natural-gas pricing reform: "a more favourable domestic natural gas pricing policy" plus "the Chinese government's more relaxed approach towards utility price hikes in a deflationary environment" lets PetroChina "execute a stronger natural gas price hike in the winter peak demand season" — leading to higher city-gate ASP and lower import gas losses [6][7].

### 5. SOTP NAV math points to upside
| Segment | NAV (Rmb bn) | HK$/sh | Methodology |
|---|---|---|---|
| **E&P** | 800.4 | 4.7 | DCF, 8% WACC, US$75/70 oil |
| **Refining & Chemical** | 220.6 | 1.3 | 4x 25CL EV/EBITDA |
| **Marketing** | 120.0 | 0.7 | 3x 25CL EV/EBITDA |
| **Natural Gas** | 291.5 | 1.7 | 1.2x PB |
| Total Asset Value | 1,432.5 | 8.4 | |
| Net Cash | 131.9 | 0.8 | |
| Minority Interest | (196.5) | (1.1) | |
| **H-share TP** | | **HK$8.00** | |
| **A-share TP** (50% A-H premium) | | **Rmb11.20** | [9] |

### 6. Tactical hedge against oil-price volatility
As OPEC+ unwinds its production cuts through 2025, "OPEC+ spare capacity will fall to c.3mb/d, a level where oil price volatility would become extreme. Oil equities could be a cheap hedge to such rising volatility" — and CLSA's order of preference for the Chinese oil majors is **PetroChina > CNOOC > Sinopec** (per the "Rising tide" 15-Jun-2025 sector note table-of-contents narrative).

---

## BEAR CASE

### 1. Top-line growth has stalled — earnings now in mild decline
CLSA's own model forecasts **5-year earnings stagnation**: Net profit declining from Rmb164.7bn (2024A) to Rmb156.4bn (25CL), Rmb156.3bn (26CL), Rmb157.3bn (27CL) — a **-5% / -0.1% / +0.6% trajectory**. Margins compress materially: gross margin from 16.2% → 5.2% → 3.6% → 2.5%; ROE from 11.1% → 10.0% → 9.4% → 9.0%. This is a no-growth utility, not a re-rating candidate.

### 2. Lower oil prices = direct risk to base case
CLSA's two explicit downside risks: **"slower-than-expected natural gas demand growth in China and lower oil prices than our base case"** [7]. The base case already uses **US$75/US$70 Brent for 25/26CL** — and the 1Q26 filing shows realized crude oil price dropped **-8.5% YoY to US$64.08/bbl**, well below CLSA's assumption [11]. The oil-gas-new-energy segment's 1Q26 operating profit fell by **RMB5.84bn YoY** (down from RMB46.9bn to RMB41.0bn) "primarily due to the decline of oil and gas sales prices and the decrease in crude oil sales volume" [13].

### 3. Domestic downstream is visibly weak
1Q25 aggregate downstream EBIT (Refining + Chemical + Marketing) fell **~30% YoY**, with marketing sales volumes **-6% YoY** — "showing signs of weakness in domestic consumption, similar to what we observe for Sinopec" [8]. The deflationary domestic backdrop and EV penetration are structurally cannibalising the gasoline barrel.

### 4. OPEC+ oversupply is the dominant macro risk
The March 2025 sector cut crystallised CLSA's caution: OPEC+ unwinding its 2.2mb/d Covid-era cut from April 2025 through September 2026 raises 2025 oversupply beyond 1mb/d. CLSA cut 25/26CL Brent to **US$75/US$70** and lowered 25-26CL EPS for Chinese majors by **5-8%** at that point — and the 1Q26 data shows realized prices already running below even those reduced assumptions [13].

### 5. Production growth is near-zero
1Q26 total oil & gas equivalent output **+0.7% YoY (470.2mn bbl)**, with crude oil output actually **-1.0% YoY** (overseas -5.6%). New energy (wind/PV) was +38.5% but off a tiny base (2.33 TWh) [10]. This is a mature upstream — there is **no production-growth lever** to compensate for price weakness.

### 6. Yield is the support — and the ceiling
At ~8% dividend yield, the stock is **"a strong support to its share price"** in CLSA's framing — but that same framing implies share-price upside is capped at TP HK$8 (~8% from current HK$7.40). This is a coupon-clip thesis, not a re-rating story.

### 7. Governance / state-owned overhang
**CNPC owns 82.6%** — capital allocation, capex, and dividend policy are ultimately set with national-energy-security objectives that may diverge from minority-shareholder return optimisation. The free float is small relative to market cap.

---

## VERDICT (per CLSA)

**Outperform, TP HK$8 / Rmb11.20** — PetroChina is CLSA's most preferred Chinese oil major [2]. The bull case rests on **gas monetisation + 8% yield + capex discipline = defensive total return**. The bear case rests on **stalled EPS + lower-than-base-case realized oil prices + weak domestic downstream**. Net, CLSA sees the **8% yield acting as floor**, with modest SOTP upside (~8% at the H-share); attractive if you want EM-energy yield without commodity beta, but **not a vehicle for oil-price upside** (CNOOC offers cleaner E&P leverage with 23% TP upside).

---

**Sources**
[1][2][5][7][8][9] — *PetroChina – O-PF (Bearing fruit)* — CLSA, Horace Tse (29 Apr 2025) — 607957521LinqAlpha.PDF
[3][4][6] — *PetroChina – O-PF (All you need is yield)* — CLSA, Horace Tse (30 Mar 2025) — 607954432LinqAlpha.PDF
*Global energy (Rising tide)* — CLSA (15 Jun 2025) — 607961993LinqAlpha.PDF (referenced for sector preference order and OPEC+ spare-capacity framing — SUMMARY chunk, not directly citable)
*China energy (Fourth time (un)lucky)* — CLSA (4 Mar 2025) — 607952213LinqAlpha.PDF (referenced for OPEC+ oversupply / 8-9% yield support framing — SUMMARY chunk, not directly citable)
[10][11][12][13] — *PetroChina Company Limited — First Quarterly Report of 2026* (issued 29 Apr 2026)
[14] — *PetroChina Company Limited — 2025 Annual Results Presentation* (30 Mar 2026)

## Citations

- [1] **607957521LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957521LinqAlpha.PDF>
- [2] **607957521LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957521LinqAlpha.PDF>
- [3] **607954432LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/03/607954432LinqAlpha.PDF>
- [4] **607954432LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/03/607954432LinqAlpha.PDF>
- [5] **607957521LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957521LinqAlpha.PDF>
- [6] **607954432LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/03/607954432LinqAlpha.PDF>
- [7] **607957521LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957521LinqAlpha.PDF>
- [8] **607957521LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957521LinqAlpha.PDF>
- [9] **607957521LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957521LinqAlpha.PDF>
- [10] **PetroChina Co., Ltd. Class H: FIRST QUARTERLY REPORT OF 2026** · external
- [11] **PetroChina Co., Ltd. Class H: FIRST QUARTERLY REPORT OF 2026** · external
- [12] **PetroChina Co., Ltd. Class H: FIRST QUARTERLY REPORT OF 2026** · external
- [13] **PetroChina Co., Ltd. Class H: FIRST QUARTERLY REPORT OF 2026** · external
- [14] **PetroChina Company Limited, Q4 2025** · external

