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

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China Everbright Securities releases research report stating that the settlement of overseas early-stage projects has impacted the company’s performance. The company has lowered its profit forecasts for Sinopec Refining & Chemical Engineering (02386) for 2026-2027, added a forecast for 2028, and expects the net profit attributable to parent company for 2026-2028 to be 2.355 billion yuan (down 15%), 2.566 billion yuan (down 12%), and 2.831 billion yuan, respectively. Corresponding EPS are 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 undervaluation and high dividend payout highlight its value. The firm maintains a “Buy” rating on the company.

Key points from China Everbright Securities:

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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 parent of 1.798 billion yuan, down 27.09% year-on-year.

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

In 2025, China’s energy and chemical industry underwent transformation and structural adjustment, advancing towards higher-end and more refined development. Projects related to oil conversion and specialty oil processing accelerated, and demand for high-end chemical materials continued to grow, solidifying the company’s domestic business foundation. In the Gulf region, leveraging resource and capital advantages, oil and gas and downstream refining capacities continued to expand, creating global market opportunities. In 2025, the company’s revenue increased by 9.15% year-on-year, but net profit attributable to parent decreased by 27.09%. The gross profit margin was 7.4%, down 0.9 percentage points. Projects signed in 2020-2021 for overseas subcontracting, including the Saudi Marjan oil and gas expansion project’s P10 sulfur recovery unit and the Berri oilfield oil and gas processing project, underperformed in progress and profitability, impacting overall gross margin and net profit. 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.

New contract signing remains steady, internal contract share within Sinopec Group increases

In 2025, the company’s domestic new contracts totaled 63.2 billion yuan, up 2% year-on-year, while overseas new contracts totaled 38 billion yuan, down 1.3%, with overseas contracts accounting for 38% of total new contracts. As Sinopec’s transformation projects such as Luoyang Ethylene and Maoming Ethylene commenced, new contracts from Sinopec Group and its affiliates reached 55.4 billion yuan, accounting for 55%, a 46% increase year-on-year. External market new contracts totaled 45.8 billion yuan, down 27%, leading to a higher internal contract share.

Domestic and international markets present new opportunities. The company’s strengthened market expansion is expected to benefit fully.

Domestic market: China is accelerating the construction of a modern industrial system, with high-quality development of the petrochemical industry progressing steadily. Large refining and chemical bases are rapidly advancing, downstream petrochemical industries are expanding, and high-end new materials projects are maintaining growth in capital expenditure. Policies on energy saving, carbon reduction, process optimization, and equipment upgrades are being introduced, creating more opportunities for the company’s core business. Overseas market: active capital expenditure in the Middle East has exceeded $100 billion, with increasing refining capacity in oil-producing countries. Sinopec Group deepens Belt and Road cooperation, benefiting from platform advantages, with broad prospects for order acquisition in the Middle East. The company is strengthening market development, and as new contracts domestically and abroad steadily grow, its business is expected to see rapid expansion.

Risk Warning: Fluctuations in refining and chemical industry cycles, project delays, overseas market risks.