Everbright Securities: Maintains "Buy" Rating for China Petroleum & Chemical Exploration and Engineering, New Signed Contract Value Steadily Improving

Everbright Securities releases a research report stating that the settlement of overseas early-stage projects has impacted the company’s performance. The report lowers the profit forecasts for Sinopec Refining & Chemical Engineering (02386) for 2026-2027 and adds a forecast for 2028. It is expected that the company’s net profit attributable to the parent company will be 2.355 billion yuan (down 15%) in 2026, 2.566 billion yuan (down 12%) in 2027, and 2.831 billion yuan in 2028, with corresponding EPS of 0.54, 0.58, and 0.64 yuan per share. Backed by Sinopec Group’s resource advantages, the company continues to expand domestically and internationally. Its performance is expected to keep growing, and under the background of state-owned enterprise reform, the company’s low valuation and high dividend payout highlight its value. The firm maintains a “Buy” rating on the company.

Everbright Securities’ main points are as follows:

Event

The company released its 2025 annual report. In 2025, it achieved total revenue of 70.074 billion yuan, a year-on-year increase of 9.15%, and net profit attributable to the parent was 1.798 billion yuan, down 27.09% year-on-year.

Steady revenue growth in 2025, but overseas subcontracting projects dragged performance

In 2025, China’s energy and chemical industry underwent transformation and structural adjustment, advancing towards higher-end and more refined development. Projects such as oil refining and specialized oil projects accelerated, and demand for high-end chemical materials continued to grow, solidifying the company’s domestic business foundation. Relying on resource and capital advantages, the Middle East Gulf region maintained expansion in oil, gas, and downstream refining capacity, creating global market opportunities. In 2025, the company’s revenue increased by 9.15% year-on-year, but net profit attributable to the parent decreased by 27.09%. Gross profit margin was 7.4%, down 0.9 percentage points. Projects signed in 2020-2021 for overseas subcontracting dragged down overall gross margin and net profit. The progress and benefits of contracts such as the sulfur recovery unit in Saudi Arabia’s Marjan oil and gas expansion project P10 package and the Saudi Berri oilfield oil and gas processing project fell short of expectations. As a result, the company’s construction segment’s gross profit in 2025 was 2 billion yuan, down 1.1 billion yuan, with a gross margin of 0.8%, down 4 percentage points year-on-year.

Steady growth in new contracts signed, with an increased proportion of contracts within Sinopec Group

In 2025, the company signed new domestic contracts worth 63.2 billion yuan, up 2%, and new overseas contracts worth 38 billion yuan, down 1.3%. Overseas contracts accounted for 38% of new contracts. As Sinopec’s transformation projects such as Luoyang Ethylene and Maoming Ethylene launched successively, new contracts from Sinopec Group and its contacts totaled 55.4 billion yuan, accounting for 55%, a 46% increase year-on-year. New contracts from external markets totaled 45.8 billion yuan, down 27%, with an increased internal contract proportion.

New opportunities in domestic and international markets; company’s strengthened market expansion expected to benefit fully

Domestically, China is accelerating the construction of a modern industrial system, and high-quality development of the petrochemical industry is progressing steadily. Large refining and chemical bases are rapidly advancing, downstream petrochemical industries are expanding, and investments in high-end new materials projects are increasing. Policies related to energy saving, carbon reduction, process optimization, and equipment upgrades have been introduced, bringing more opportunities for the company’s core business. Internationally, the Middle East has seen active capital expenditure exceeding $100 billion, with refining and chemical production capacity in oil-producing countries increasing year by year. Sinopec Group deepens cooperation along the Belt and Road, benefiting from platform advantages, with broad prospects for order acquisition in the Middle East. The company is strengthening market development, and as new contracts are steadily signed domestically and abroad, its business is expected to grow rapidly.

Risk warning: Fluctuations in the refining and chemical industry cycle, project delays, overseas market risks.

(Edited by: Dong Pingping)

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