JPMorgan has revised its net profit forecast for SINOPEC CORP (00386) for 2026 downward by 28%, while increasing its 2027 projection by 5%. The target price for SINOPEC's H-shares has been reduced from HK$5.5 to HK$5, and the target for its A-shares (600028.SH) has been cut from RMB 7.2 to RMB 6.5, with a "neutral" rating maintained.
The National Development and Reform Commission recently announced increases in domestic gasoline and diesel prices by RMB 1,160 and RMB 1,115 per ton, respectively. These adjustments were approximately 47% to 50% lower than the calculated mechanism-based increases. JPMorgan anticipates the market will interpret this as a slight short-term negative for SINOPEC CORP, as the company processes 5 million barrels of crude per day, with over 80% sourced from seaborne imports. This means SINOPEC will face higher crude costs for at least the next 10 working days while being required to sell refined products at lower benchmark prices.
The report notes that SINOPEC's management has acknowledged that conflict in the Middle East could pressure its second-quarter refining margins. To mitigate the impact, the company has increased procurement of non-Middle Eastern crude, raised domestic crude output, and utilized commercial inventories. JPMorgan believes that, in contrast, PetroChina (00857) is better positioned to withstand rising refining costs caused by the Middle East situation, as seaborne imported crude accounts for only about 13% of its refining operations.
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