Key Takeaways:
Sinopec Corp shares jumped 5.11 percent to HK$4.63 after CLSA raised its target price, citing a second-quarter profit that beat market concerns.
"The results were better than market concerns in a challenging operating environment," CLSA said in a report, pointing to Middle East tensions that disrupted crude supply in the quarter.
Sinopec booked second-quarter net profit of RMB8.8 billion, down 10 percent year on year and 50 percent quarter on quarter. The refiner announced an interim dividend of RMB0.105 a share, up 19 percent year on year, lifting the payout ratio three percentage points to 48 percent — a positive surprise, CLSA said.
The broker raised its 2026-28 earnings-per-share forecasts by 0-7 percent and lifted the H-share target to HK$5.1 from HK$4.9, and the A-share target to RMB6.7 from RMB6.4. At HK$4.63, the stock trades about 10 percent below the new target.
The stock broke above its 250-day moving average and the neckline of a head-and-shoulders bottom pattern, reaching an intraday high of HK$4.675, its highest in more than three months. Turnover swelled to 231 million shares worth HK$1.068 billion.
CLSA said the market is focused on three issues for Sinopec: whether crude imports remain affected by Middle East tensions, how downstream profitability holds with oil above USD90 a barrel, and when Beijing may relax supply-security constraints to let refiners resume refined-oil exports and capture rising regional margins.
Sinopec's first-half net profit rose 19.3 percent year on year to RMB25.63 billion under Chinese accounting standards, despite a RMB16 billion asset-impairment provision tied to oil-price volatility. The company processed 113.31 million metric tons of crude in the period, down 5.6 percent, while its refining margin climbed 44.1 percent to RMB453 a ton and refining operating profit surged 381.5 percent. The chemicals segment narrowed its operating loss by about RMB4 billion to RMB0.2 billion.
The refiner relies on the Middle East for half of its crude needs, and the Strait of Hormuz — a key import route — has remained largely closed since March. Domestic fuel demand fell 8.6 percent in the first half as high oil prices and new-energy substitution weighed on consumption, while Beijing limited refiners' ability to pass higher crude costs to consumers.
The dividend increase points to a shareholder-friendly capital-allocation stance that could draw income-focused investors to the stock. CLSA's upgrade gives Sinopec about 10 percent upside to its new target, with the next event to watch being any relaxation of China's refined-oil export curbs.
This article is for informational purposes only and does not constitute investment advice.
