Sinopec

CHINA / OIL & GAS

386 HK

TARGET PRIOR TP CLOSE UP/DOWNSIDE

HKD6.20 HKD6.20 HKD7.26 -14.6%

REDUCE
FROM HOLD

HOW WE DIFFER FROM THE STREET

BNP Consensus Target Price (HKD) EPS 2010 (RMB) EPS 2011 (RMB) Market Recs. 6.20 0.65 0.66 Positive 22 8.82 0.79 0.85 Neutral 7 % Diff (29.7) (17.9) (22.4) Negative 1

ADR TICKER: SNP US

CHANGE IN RECOMMENDATION

EPS cuts on the way

With Crude prices and CPI high, refining will suffer We think the Street has over-estimated 4Q10 and 1Q11 earnings Despite this, Sinopec has traded up along with commodities We downgrade due to valuations and crude price outlook

KEY STOCK DATA

YE Dec (RMB m) Revenue Rec. net profit Recurring EPS (RMB) Prior rec. EPS (RMB) Chg. In EPS est. (%) EPS growth (%) Recurring P/E (x) Dividend yield (%) EV/EBITDA (x) Price/book (x) Net debt/Equity ROE (%) 2010E 1,293,872 56,670 0.65 0.65 1.3 (8.2) 9.5 2.6 5.2 1.3 39.5 13.9 2011E 1,445,558 57,648 0.66 0.66 0.0 1.7 9.4 2.7 4.9 1.1 34.0 12.8 2012E 1,539,632 61,734 0.71 0.71 0.0 7.1 8.7 2.9 4.5 1.0 28.3 12.5

Why has Sinopec rallied?

(HKD) 8.00 7.00 6.00 5.00 Nov-09

Sinopec Rel to MSCI China

(%) 3 (2) (7) (12) Nov-10

12 Month 11.5 0.0 March 2011 81,089 90.1 23

We see the argument for a weak USD to benefit integrated oils and upstream oils, but why Sinopec? The companys breakeven in refining is USD81.30/bbl. Before the quantitative easing (QE) and the USD madness, the company was making money, but now after 1H10, the USD worries have pushed crude up above Sinopecs breakeven, pushing Bradley Way Sinopecs equity price up in the process. +86 10 6561 1118 ext 1215 We dont see any kind of fundamental bradley.j.way@asia.bnpparibas.com support for this stock-price appreciation. If crude stays here, well see expectations lowered for 4Q10, 2010, and into 2011. Sinopec trades on near-term news flow and near-term valuation-oriented issues. This is due to its low transparency regarding earnings, with an inflation-concerned government controlling its outputs, and international crude markets controlling its inputs. As such, we see earnings downgrades by the Street as near-term relevant catalysts. We downgrade on these concerns and as we find valuations excessive.

A few things arent working out

Feb-10 May-10
1 Month 8.4 2.1

Aug-10

Share price performance Absolute (%) Relative to country (%) Next results Mkt cap (USD m)

3 Month 18.2 6.7

3m avg daily turnover (USD m) Free float (%) Major shareholder 12m high/low (HKD) 3m historic vol. (%) ADR ticker ADR closing price (USD; 2 December 2010)
Sources : Bloomberg consensus; BNP Paribas estimates

Sinopec parent (55%) 7.94/5.75 25.7 SNP US 96.00

In response to higher gasoline prices and taxes on gasoline promulgated in end-2008, were seeing distributors and third-party retailers blending methanol into gasoline (1:3 blend) and underselling regulated gasoline at a profit. Were also seeing traffic congestion lower the average mileage driven by taxis in tier-1 cities, which has muted the relationship between auto sales and gasoline sales. Were seeing the government increasingly concerned about inflation and therefore slow to raise fuel prices. Volumes out of Puguang and its Sichuan gas projects have been trimmed back, and costs for these fields arent great. Petchem is ticking along, but the opening of large facilities in 2010 is going to affect margins and utilisation in 2011. We expect Sinopec to face a number of challenges.

Valuation

RECENT COMPANY & SECTOR RESEARCH

1H good; what next?......................................... 19 Aug 2010 Not cheap, no visibility ..................................... 27 May 2010 China Energy......................................................27 Oct 2010 Lacking earnings catalyst ................................ 25 Sep 2010

Against these issues, the stock is up 20% since September 2010, vs 10% increase in the HSI. Over this time period, its refinery went in the opposite direction, from profitable to unprofitable. We downgrade purely on valuation issues. We value the stock at a target 2011E P/E of 8.5x. The stock has exceeded our target price. Effects of QE and USD aside, we simply cant justify profits deteriorating and the stock rallying simultaneously. We downgrade to REDUCE (from Hold), while keeping our SoTP-based target price unchanged at HKD6.20. Risks: unexpected movement in crude oil markets; fuel subsidies and efforts to control inflation; accidents and environmental problems, and force majeure.

BNP Paribas Securities Asia research is available on Thomson One, Bloomberg, TheMarkets.com, Factset and on http://equities.bnpparibas.com. Please contact your salesperson for authorisation. Please see the important notice on the back page.

PREPARED BY BNP PARIBAS SECURITIES ASIA

6 December 2010

THIS MATERIAL HAS BEEN APPROVED FOR U.S DISTRIBUTION. IMPORTANT DISCLOSURES CAN BE FOUND IN THE DISCLOSURES APPENDIX.

BRADLEY WAY

SINOPEC

6 DECEMBER 2010

Fair value against current value: Where is the gap smallest?

We have graphed BNP Paribas fair value of stocks under coverage, below. We use our BNPP house oil prices, which include USD80/bbl for 2010, and USD90/bbl for our longterm price. We apply 11.8% WACC to CNOOC, 11.3% WACC to PetroChina,12.5% WACC to Sinopec and 12% WACC to RIL, ONGC & Cairn. Sinopec is currently below its fair value, if we look at a plain-vanilla valuation, which captures a snapshot of the company if all of its businesses were profitable. We apply a sum-of-the-parts (SoTP) valuation NPV of its E&P business, and 1x its Refining & Petchem NAVs. However, Sinopecs earnings can change rapidly, with refining capacity of nearly 4m bpd. Since the company is unable to control crude prices or refined fuel prices, swings in profitability can be large. This tends to result in a very near-term or quarterly focus to its earnings and valuation. We find this makes the company more of a trading stock. With this in mind, and with the likelihood of a 4Q10 loss to eliminate 3Q10 profits, we downgrade to REDUCE. Exhibit 1: PetroChina Fair Value vs Current Stock Price
(HKD/share) 16 14 12 10 8 6 4 2 0 PetroChina fair value
PetroChina WACC (%) BNPP price assumptions Crude oil (USD/bbl) Natural gas (USD/mmbtu) HKD/RMB Inflation (%) Valuation methodology Segment E&P R&M Chemicals Natural gas PetroChina fair value PetroChina current price Upside (%)
Prices as on 2 Dec 2010 Sources: Bloomberg, BNP Paribas estimates

Exhibit 2: CNOOC Fair Value vs Current Stock Price

(HKD/share) 20 16 14.27 17.54

E&P 14.61 0.45 1.32 Chemicals

R&M Natural gas

0.40

9.97 12 12.45 8 4 0 PetroChina current price

11.3 2010E 80 5.98 1.10 2.25 Long term 90 8.00 1.10 2.25

14.27

CNOOC fair value

CNOOC WACC (%) BNPP price assumptions Crude oil (USD/bbl) Natural gas (USD/mmbtu) HKD/RMB Inflation (%) Valuation methodology

CNOOC current price

11.8 2010E 80 6.02 1.10 2.25 Long term 90 8.30 1.10 2.25

Methodology E&P Net NPV 1x Refining NAV+ 1x Marketing NAV 1x NAV 1x NAV

(HKD/share) 12.45 1.32 0.45 0.40 14.61 9.97 47

Segment E&P

Methodology E&P NPV

(HKD/share) 14.27

CNOOC fair value CNOOC current price Downside (%)

Prices as on 2 Dec 2010 Sources: Bloomberg, BNP Paribas estimates

14.27 17.54 19

BNP PARIBAS

BRADLEY WAY

SINOPEC

6 DECEMBER 2010

Exhibit 3: Sinopec Fair Value vs Current Stock Price

(HKD/share) 12 9.91 10 8 6 4 2 0 Sinopec fair value
Sinopec WACC (%) BNPP price assumptions Crude oil (USD/bbl) Natural gas (USD/mmbtu) HKD/RMB Inflation (%) Valuation methodology Segment E&P R&M Chemicals Sinopec fair value Sinopec current price Upside (%)
Prices as on 2 Dec 2010 Sources: Bloomberg, BNP Paribas estimates

Exhibit 4: RIL Fair Value vs Current Stock Price

E&P Petrochemicals (INR/share) 1,200 1,077.00 123 251 344 Refining Others + Net cash/ debt

E&P

R&M

Chemicals

1.54

1,011.70

7.39

1,000 800 600 400

3.88

4.49

200 0 Sinopec current price

12.5 2010E 80 5.65 1.10 2.25 Long term 90 6.77 1.10 2.25

359 RIL fair value RIL current price

12.0 2010E 80 4.20 45.00 2.00 Long term 90 4.20 45.00 2.00

RIL (RIL IN) WACC (%) BNPP price assumptions Crude oil (USD/bbl) Natural gas (USD/mmbtu) INR/USD Inflation (%) Valuation methodology

Methodology E&P Net NPV 1x Refining & Marketing NAV 1x NAV

(HKD/share) 4.49 3.88 1.54 9.91 7.39 34

Segment E&P Refining Petrochemicals Others + Net cash/ debt RIL fair value RIL current price Upside (%)

Methodology E&P NPV EV/ EBITDA EV/ EBITDA at book

(INR/share) 359.00 344.00 251.00 123.00 1,077.00 1,011.70 6

Prices as on 2 Dec 2010 Sources: Bloomberg, BNP Paribas estimates

BNP PARIBAS

BRADLEY WAY

SINOPEC

6 DECEMBER 2010

Exhibit 5: ONGC Fair Value vs Current Stock Price

(INR/share) 1,600 1,525.00 89 247 Other investments E&P - OVL E&P - ONGC standalone 1,313.50

Exhibit 6: Cairn Fair Value vs Current Stock Price

(INR/share) 350 300 250 200 331.0 324.80

1,200

800 1,189 400

150 100 50

331

0 ONGC fair value

ONGC (ONGC IN) WACC (%) BNPP price assumptions Crude oil (USD/bbl) Natural gas (USD/mmbtu) INR/USD Inflation (%) Valuation methodology Segment E&P ONGC standalone E&P OVL Other investments ONGC fair value ONGC current price Upside (%)
* 12% discount to Brent Prices as on 2 Dec 2010 Sources: Bloomberg, BNP Paribas estimates

0 ONGC current price

12.0 2010E 71.28* 4.00 45.00 2.00 Long term 79.20 4.00 45.00 2.00

Cairn fair value

Cairn (CAIR IN) WACC (%) BNPP price assumptions Crude oil (USD/bbl) Natural gas (USD/mmbtu) INR/USD Inflation (%) Valuation methodology

Cairn current price

12.0 2010E 60 4.20 45.00 2.00 Long term 60 4.20 45.00 2.00

Methodology EV/EBITDA EV/ bbl at book

(INR/share) 1,189.00 247.00 89.00 1,525.00 1,313.50 16

Segment E&P

Methodology E&P NPV

(INR/share) 331.00

Cairn fair value Cairn current price Upside (%)

* Regulated, USD60/bbl average post subsidies Prices as on 2 Dec 2010 Sources: Bloomberg, BNP Paribas estimates

331.00 324.80 2

Exhibit 7: Forward P/E Of Chinese NOCs

(x) 25 20 15 10 5 0 Jan-05 PetroChina P/E Sinopec P/E CNOOC P/E

Nov-05

Sep-06

Jul-07

May-08

Mar-09

Jan-10

Nov-10

Sources: Bloomberg; BNP Paribas estimates

BNP PARIBAS

BRADLEY WAY

SINOPEC

6 DECEMBER 2010

EPS (RMB) BNPP base case EPS USD1 increase in crude price USD1 decrease in crude price

2010E 0.65 0.56 0.75

Diff (%) (14.8) 14.8

Key Earnings Drivers & Sensitivity

A USD1 increase in our crude price assumption for 2010 leads to a 14.8% downside to our base case EPS estimate. A USD1 decrease in our crude price assumption for 2010 leads to a 14.8% upside to our base case EPS estimate.

Sources: BNP Paribas estimates

Sinopec And OECD World Crude Oil Price FOB Spot Brent USD (3M And 6M Realised-Vol)
13

Regression Sinopec Rel to Hang Seng Index

(%) 180 160 140 100 80 60 40 20 0 Nov-02 Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10
Sinopec - 3M Realised - Vol Sinopec - 6M Realised - Vol OECD World Crude Oil Price FOB Spot Brent USD - 3M Realised - Vol OECD World Crude Oil Price FOB Spot Brent USD - 6M Realised - Vol

12 11 10 9
Sinopec

120

8 7 6 5 4 3 11206

Sources: Bloomberg; BNP Paribas

16206 21206 26206 31206 Hang Seng Index Sinopec = -2 + 0 * HSI Index R Square = 0.8342 Regression based on 261 observations of 5 years weekly data. Please refer to Appendix 1 for the explanation of R-square Sources: Bloomberg; BNP Paribas

China Sector Correlation Matrix at 15 July 2010

China Banks China Banks China Coal China Insurance China Metals & Mining China Oil & Gas China Property China Telcos China Utilities
Source: BNP Paribas Sector Strategy

China Coal 0.849 1.000

China Insurance 0.868 0.829 1.000

China Metals & Mining 0.809 0.881 0.832 1.000

China Oil & Gas 0.882 0.912 0.859 0.858 1.000

China Property 0.724 0.735 0.760 0.770 0.718 1.000

China Telcos 0.845 0.797 0.826 0.774 0.858 0.658 1.000

China Utilities 0.663 0.684 0.669 0.666 0.721 0.594 0.690 1.000

1.000

Long/Short Chart
(x) 1.00 0.95 0.90 0.85 0.80 0.75 0.70 0.65 0.60 0.55 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 +2s +1s Mean -1s -2s

The Risk Experts

The Risk Experts

Our starting point for this page is a recognition of the macro factors that can have a significant impact on stockprice performance, sometimes independently of bottom-up factors. With our Risk Expert page, we identify the key macro risks that can impact stock performance. This analysis enhances the fundamental work laid out in the rest of this report, giving investors yet another resource to use in their decision-making process.

Sinopec - PetroChina

Sources: BNP Paribas estimates

BNP PARIBAS

BRADLEY WAY

SINOPEC

6 DECEMBER 2010

FINANCIAL

STATEMENTS

Sinopec
Profit and Loss (RMB m) Year Ending Dec
Revenue Cost of sales ex depreciation Gross profit ex depreciation Other operating income Operating costs Operating EBITDA Depreciation Goodwill amortisation Operating EBIT Net financing costs Associates Recurring non operating income Non recurring items Profit before tax Tax Profit after tax Minority interests Preferred dividends Other items Reported net profit Non recurring items & goodwill (net) Recurring net profit Per share (RMB) Recurring EPS * Reported EPS DPS Growth Revenue (%) Operating EBITDA (%) Operating EBIT (%) Recurring EPS (%) Reported EPS (%)

2008A
1,413,203 (1,286,106) 127,097 31,088 (136,385) 21,800 (46,321) 0 (24,521) (5,190) 51,437 390 0 22,116 2,840 24,956 3,569 0 0 28,525 0 28,525 0.33 0.33 0.12 20.4 (83.1) (128.6) (53.5) (53.5)

2009A
1,315,915 (990,459) 325,456 29,137 (219,675) 134,918 (50,487) 0 84,431 (7,234) 2,997 374 0 80,568 (16,084) 64,484 (2,724) 0 0 61,760 0 61,760 0.71 0.71 0.18 (6.9) 518.9 (444.3) 116.5 116.5 20.9 10.3 6.4 4.7 20.0 25.0 12.1 43.8 6.3 36.1 16.9 4.0 11.6 (1.3) 17.1 8.5

2010E
1,293,872 (425,961) 867,911 24,474 (752,530) 139,855 (55,394) 0 84,462 (8,940) 2,997 374 0 78,892 (19,723) 59,169 (2,499) 0 0 56,670 0 56,670 0.65 0.65 0.16 (1.7) 3.7 0.0 (8.2) (8.2) 62.8 10.8 6.5 4.4 25.0 25.0 9.8 93.2 6.6 76.8 13.8 1.0 9.8 (3.0) 13.9 7.5

2011E
1,445,558 (551,663) 893,895 24,589 (771,244) 147,241 (60,812) 0 86,428 (9,545) 2,997 374 0 80,255 (20,064) 60,191 (2,543) 0 0 57,648 0 57,648 0.66 0.66 0.17 11.7 5.3 2.3 1.7 1.7 57.6 10.2 6.0 4.0 25.0 25.0 9.4 57.6 4.8 45.3 12.6 (0.3) 9.2 (3.6) 12.8 7.4

2012E
1,539,632 (610,866) 928,766 24,710 (794,268) 159,208 (66,292) 0 92,916 (10,345) 2,997 374 0 85,942 (21,485) 64,456 (2,723) 0 0 61,734 0 61,734 0.71 0.71 0.18 6.5 8.1 7.5 7.1 7.1 56.0 10.3 6.0 4.0 25.0 25.0 9.3 61.9 4.9 49.5 12.7 9.5 12.5 7.2

We foresee earnings downgrades as USD concerns push crude over its breakeven level and the Chinese government remains slow to raise fuel prices due to inflation concerns

Operating performance Gross margin inc depreciation (%) 5.7 Operating EBITDA margin (%) 1.5 Operating EBIT margin (%) (1.7) Net margin (%) 2.0 Effective tax rate (%) (12.8) Dividend payout on recurring profit (%) 36.5 Interest cover (x) 5.3 Inventory days 30.1 Debtor days 6.8 Creditor days 25.6 Operating ROIC (%) (5.8) Operating ROIC WACC (%) (18.8) ROIC (%) 4.3 ROIC WACC (%) (8.7) ROE (%) 8.8 ROA (%) 3.9 * Pre exceptional, pre-goodwill and fully diluted

Revenue By Division (RMB m)

E&P Refining Marketing Chemicals Other
Sources: Sinopec; BNP Paribas estimates

2008A
26,403 132,209 802,817 219,723 232,051

2009A
19,342 95,792 778,417 192,735 229,629

2010E
22,381 106,167 673,951 256,004 235,370

2011E
22,381 119,060 763,669 299,195 241,254

2012E
22,381 126,817 810,960 332,188 247,285

BNP PARIBAS

BRADLEY WAY

SINOPEC

6 DECEMBER 2010

Sinopec
Cash Flow (RMB m) Year Ending Dec
Recurring net profit Depreciation Associates & minorities Other non-cash items Recurring cash flow Change in working capital Capex - maintenance Capex new investment Free cash flow to equity Net acquisitions & disposals Dividends paid Non recurring cash flows Net cash flow Equity finance Debt finance Movement in cash Per share (RMB) Recurring cash flow per share FCF to equity per share

2008A
28,525 46,321 (55,006) 62,529 82,369 (8,101) (109,483) 0 (35,215) (10,021) (24,232) 13,378 (56,090) (267) 55,659 (698) 0.95 (0.41)

2009A
61,760 50,487 (273) 17,814 129,788 29,008 (117,303) 0 41,493 (5,501) (21,194) 7,679 22,477 (144) (20,591) 1,742 1.50 0.48

2010E
56,670 55,394 (498) 30,393 141,959 (39,670) (95,660) 0 6,629 0 (14,167) 0 (7,538) (1,000) 15,927 7,389 1.64 0.08

2011E
57,648 60,812 (454) 825 118,831 (326) (94,548) 0 23,956 0 (14,412) 0 9,544 (1,017) 22,514 31,041 1.37 0.28

2012E
61,734 66,292 (274) 825 128,576 (481) (97,233) 0 30,862 0 (15,433) 0 15,428 (1,089) 22,514 36,853 1.48 0.36

Balance Sheet (RMB m) Year Ending Dec

2008A

2009A

2010E

2011E
162,659 (171,011) (8,352) 541,242 532,890 0 14,072 38,608 160,987 746,557 (47,180) 101,440 114,990 169,250 4,979 55,143 470,973 26,217 726,563

2012E
177,185 (185,056) (7,871) 572,456 564,585 0 14,072 40,781 160,715 780,152 (84,033) 116,440 121,704 154,111 4,979 55,943 517,274 27,851 760,157

Working capital assets 158,390 192,530 132,244 Working capital liabilities (177,730) (240,878) (140,923) Net working capital (19,340) (48,348) (8,678) Tangible fixed assets 403,265 465,182 506,944 Operating invested capital 383,925 416,834 498,266 Goodwill 0 0 0 Other intangible assets 14,237 14,072 14,072 Investments 28,859 34,264 36,436 Other assets 158,739 163,044 161,549 Invested capital 585,760 628,214 710,323 Cash & equivalents (7,008) (8,750) (16,139) Short term debt 108,926 72,541 86,440 Long term debt * 90,254 108,828 108,276 Net debt 192,172 172,619 178,577 Deferred tax 5,235 4,979 4,979 Other liabilities 48,485 51,763 54,343 Total equity 337,463 385,235 427,737 Minority interests 20,653 23,192 24,692 Invested capital 604,008 637,788 690,328 * includes convertibles and preferred stock which is being treated as debt Per share (RMB) Book value per share Tangible book value per share Financial strength Net debt/equity (%) Net debt/total assets (%) Current ratio (x) CF interest cover (x) 3.89 3.73 53.7 24.9 0.6 (5.8) 4.44 4.28 42.3 19.7 0.6 6.7 4.93 4.77 39.5 20.6 0.7 1.7

5.43 5.27 34.0 17.5 0.8 3.5

5.97 5.80 28.3 14.7 0.9 4.0

Valuation

2008A

2009A

2010E

2011E
9.4 8.0 9.4 2.7 4.5 22.5 1.1 1.2 4.9 4.1 1.0

2012E
8.7 7.5 8.7 2.9 4.2 17.5 1.0 1.1 4.5 3.7 0.9

Recurring P/E (x) * 18.9 8.7 9.5 Recurring P/E @ target price (x) * 16.2 7.5 8.1 Reported P/E (x) 18.9 8.7 9.5 Dividend yield (%) 1.9 2.9 2.6 P/CF (x) 6.6 4.2 3.8 P/FCF (x) (15.3) 13.0 81.5 Price/book (x) 1.6 1.4 1.3 Price/tangible book (x) 1.7 1.5 1.3 EV/EBITDA (x) ** 9.9 5.4 5.2 EV/EBITDA @ target price (x) ** 8.2 4.5 4.3 EV/invested capital (x) 1.2 1.2 1.1 * Pre exceptional, pre-goodwill and fully diluted ** EBITDA includes associate income and recurring non-operating income
Sources: Sinopec; BNP Paribas estimates

BNP PARIBAS

BRADLEY WAY

SINOPEC

6 DECEMBER 2010

HISTORY

OF

CHANGE

IN

INVESTMENT

RATING

AND/OR

TARGET

PRICE

Sinopec (386 HK)

(HKD) 13.00 12.00 11.00 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 Dec-06

Sinopec

Target Price

Date 1-Nov-06 20-Aug-08 3-Aug-09 2-Feb-10

Reco REDUCE BUY REDUCE HOLD

TP 3.90 9.75 6.00 6.20

Sep-07

Jun-08

Mar-09

Dec-09

Sep-10

Bradley Way started covering this stock from 29 November 2006 Price and TP are in local currency Valuation and risks: Downside risks to our PE-based TP are 1) unexpected movement in crude oil markets; 2) fuel subsidies and efforts to control inflation can arise unexpectedly, which could impact the financials of energy companies; 3) accidents and environmental problems encountered in the process of exploring for and developing oil can harm the environment and can bring unexpected costs to energy companies; and 4) Force majure is common in the oil industry, and can result in production volume and income shortfalls .Upside risks would be higher-than-expected value accretion from the acquired assets and if fuel price hikes improve margins. Sources: Bloomberg, BNP Paribas

BNP PARIBAS

BRADLEY WAY

SINOPEC

6 DECEMBER 2010

DISCLAIMERS

&

DISCLOSURES

ANALYST(S) Bradley Way, BNP Paribas Securities (Asia) Ltd, Beijing Representative Office, +86 10 6561 1118 ext 1215, bradley.j.way@asia.bnpparibas.com. 1 This report was produced by a member company of the BNP Paribas Group (Group) . This report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person without our prior written consent. By accepting this report, the recipient agrees to be bound by the terms and limitations set out herein. The information contained in this report has been obtained from public sources believed to be reliable and the opinions contained herein are expressions of belief based on such information. No representation or warranty, express or implied, is made that such information or opinions is accurate, complete or verified and it should not be relied upon as such. 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Distribution or publication of this report in any other places to persons which are not permitted under the applicable laws or regulations of such places is strictly prohibited. 1 No portion of this report was prepared by BNP Paribas Securities Corp personnel. Disclosure and Analyst Certification For a complete set of required disclosures relating to the companies that are the subject of this report, please mail a request to BNP Paribas Compliance Department, 787 Seventh Avenue, New York, NY 10019. BNP Paribas represents that: BNPP or its affiliates makes a market in the securities of Sinopec. Within the next three months, BNPP or its affiliates may receive or seek compensation in connection with an investment banking relationship with one or more of the companies referenced herein. The analyst(s) named in this report certifies that (i) all views expressed in this report accurately reflect the personal view of the analyst(s) with regard to any and all of the subject securities and companies mentioned in this report; (ii) no part of the compensation of the analyst(s) was, is, or will be, directly or indirectly, relate to the specific recommendation or views expressed herein; and (iii) BNPP is not aware of any other actual or material conflicts of interest concerning any of the subject securities and companies referenced herein as of the time of publication of the research report. A detailed discussion of the valuation methodologies used to derive our target prices and the risks that could impede their achievement for stocks recommended in the report is available on request from the analyst(s) named in this report. Recommendation structure All share prices are as at market close on 3 December 2010 unless otherwise stated. Stock recommendations are based on absolute upside (downside), which we define as (target price* - current price) / current price. If the upside is 10% or more, the recommendation is BUY. If the downside is 10% or more, the recommendation is REDUCE. For stocks where the upside or downside is less than 10%, the recommendation is HOLD. In addition, we have key buy and key sell lists in each market, which are our most commercial and/or actionable BUY and REDUCE calls and are limited to at most five key buys and five key sells in each market at any point in time. Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on market price and the formal recommendation. *In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts, then the target price may differ from fair value. In most cases, therefore, our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value. Rating distribution (as at 3 December) Out of 516 rated stocks in the BNP Paribas coverage universe, 322 have BUY ratings, 134 are rated HOLD and 60 are rated REDUCE. Within these rating categories, 5.59% of the BUY-rated companies either currently are or have been BNP Paribas clients in the past 12 months, 5.22% of the HOLD-rated companies are or have been clients in the past 12 months, and 3.33% of the REDUCE-rated companies are or have been clients in the past 12 months Should you require additional information please contact the relevant BNP Paribas research team or the author(s) of this report. 2010 BNP Paribas Group

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