According to BofA Securities, Sinopec Corp (00386, 600028.SH) delivered third quarter results that exceeded expectations, with its refining business rebounding strongly.
The bank raised its H-share target price from HK$5.5 to HK$6, and based on an average A-H premium of 30%, lifted its A-share target price from RMB6.4 to RMB7, while reiterating its "Buy" rating.
The bank noted that the company's net profit for the first nine months under International Financial Reporting Standards reached RMB40 billion, up 25% year on year.
Third quarter net profit was RMB13.6 billion, up 64% year on year and 54% quarter on quarter, surpassing both the bank's and market expectations.
Operating cash flow for the first nine months was RMB162 billion, up 41% year on year, while capital expenditure was RMB75 billion, up 4% year on year, equivalent to 57% of the full-year budget.
Third quarter refining EBIT reached RMB12.6 billion, up 2.4 times year on year, reversing the RMB1.4 billion loss in the second quarter, driven by a recovery in processing volumes, strong economics for kerosene and by-products, arbitrage opportunities in refined product exports, and an inventory gain of RMB900 million.
After raising its Brent crude assumptions to US$100 per barrel for the fourth quarter of 2026 and US$80 per barrel for 2027, the bank lifted its 2026 net profit forecast by 18% to RMB56 billion, while keeping its 2027 forecast unchanged.
The bank noted that Sinopec Corp's H-shares offer an attractive valuation, with a forecast dividend yield of approximately 8.5% and a price-to-book ratio of 0.6 times for 2026.
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