Zacks Investment Research upgraded shares of China Petroleum & Chemical Corporation (Sinopec) (SNP) from UNDERPERFORM to NEUTRAL on October 19, 2012, with a target price of $111.00.
We are upgrading our recommendation on Sinopec to Neutral' from Underperform'. Profits in the first half of 2012 registered a decline of 41.1%, owing to sluggish domestic economic growth. Moreover, increases in the price of international crude oil amidst government caps on fuel prices, prevented the company from fully passing on the spiraling costs to consumers, thereby hurting refining margins. We believe that Sinopec's matured domestic oil fields and associated rising costs will continue to be an overhang on its operations as natural declines become pricier to counterbalance. However, we believe an increasing trend in production and sales volumes will help Sinopec to post sound results ahead. Management is now focused on developing bigger natural gas businesses, including conventional, non-conventional and LNG.
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