Driven by the strong domestic demand, China’s refined oil price in the second quarter approached the upper strike level set by the National Development and Reform Commission, the state planner, Macquarie said in a note.
Although it’s a low season, Sinopec’s marketing EBIT may grow by 7% quarter over quarter to 8.5 billion yuan, beating expectations, while its sales volume of refined oil products is expected to reach 36.30 million tonnes, sliding 35% on quarter, up 32% on year and rising 13% from the same period in 2021, it estimated.
Sinopec’s refining business was likely under pressure given lower prices of chemical-related oil products, but with strong policy support, the worst period may be over, it said.
Macquarie expects the gross margin for Sinopec’s refining business to reach $5.7 per barrel in the second quarter, falling by $3 per barrel from the prior quarter, and cuts the forecast of the gross margin in 2023 – 2025 fiscal year by $1 – $1.6 per barrel.
The broker cuts the target price of Sinopec by 10% to HK$5.5, and rated it Outperform. Sinopec is currently trading around HK4.34 in Hong Kong.