EB SECURITIES: Maintains a "buy" rating on SINOPEC SEG (02386) and signs a $2.5 billion EPC contract in Kazakhstan.

EB SECURITIES released a research report maintaining a "buy" rating on SINOPEC SEG (02386). The company is expected to have a net profit attributable to shareholders of 26.38 billion, 29.15 billion, and 31.82 billion yuan for the years 2024-2026, with corresponding EPS of 0.60, 0.66, and 0.72 yuan per share. The company is backed by the resources of Sinopec Group, continuously expanding its domestic and international markets, and is expected to see rapid growth in performance. The company's undervaluation and high dividend values are highlighted against the background of state-owned enterprise reform. Event: The company voluntarily announced a contract with Tecnicas Reunidas of Spain for the EPC contract for the ethane cracking project at the Silleno Petrochemical Complex Project in Kazakhstan, with a total contract value of approximately $2.5 billion. Key points from EB SECURITIES: - The project, a joint venture between KazMunayGas and China Petroleum & Chemical Corporation, marks a significant breakthrough in overseas markets. - The project is a national landmark for the development of the petrochemical industry in Kazakhstan, with the owner, Silleno, being a joint venture between KazMunayGas and China Petroleum & Chemical Corporation. The project is located in the National Petrochemical Industrial Park in the Atyrau region of western Kazakhstan. The company will form a consortium with Tecnicas Reunidas, with each holding a 50% stake, to provide EPC total contracting services. This project reflects the company's continuous efforts to strengthen overseas market development and promote high-quality development of overseas business, demonstrating the company's strategic determination. - China Petroleum & Chemical Corporation deepens cooperation under the Belt and Road Initiative, with overseas business expected to achieve rapid development. - In May 2023, China Petroleum & Chemical Corporation signed an agreement with KazMunayGas to acquire a 30% stake in the Silleno project. The project represents a new level of cooperation between China Petroleum & Chemical Corporation and KazMunayGas, showing the results of their deepening cooperation along the Belt and Road. The company benefits greatly from the platform advantages, with broad prospects for obtaining overseas market orders. In the first half of 2024, the company signed new overseas contracts worth approximately $2.354 billion, a year-on-year increase of 117.8%, continuing its strong momentum of development. The company's overseas business structure is further optimized, with EPC contracts accounting for over 75%, and business types diversifying regularly. New opportunities in domestic and international markets, with the company expected to benefit from strengthened market development. - In the domestic market, China is rapidly building a modern industrial system, with solid progress in the high-quality development of the petrochemical industry. The construction of large-scale refining and chemical bases is swiftly advancing, the downstream petrochemical industry chain is continuously extending, capital expenditure on high-end new materials projects is growing, and policies related to energy-saving, carbon reduction, process optimization, and equipment renewal and replacement are successively introduced, bringing more opportunities for the company's main business development. In the overseas market, capital expenditure in the Middle East region has exceeded $100 billion, and the refining and chemical production capacity of oil-producing countries is increasing year by year. China Petroleum & Chemical Corporation deepens cooperation under the Belt and Road Initiative, with the company benefiting greatly from platform advantages and having broad prospects for obtaining orders in the Middle East market. The company is strengthening market development efforts, with steady progress in new contracts both domestically and internationally, expected to lead to high-speed business growth. Risk warning: Fluctuations in the petrochemical industry, project delays, and risks in overseas markets are potential risks.