Morning Star: Adjusts SINOPEC CORP (00386) fair value forecast to 5.7 Hong Kong dollars.

Morningstar released a research report stating that after evaluating energy prices and profit forecasts, due to the impact of the appreciation of the Renminbi, the fair value forecast of SINOPEC CORP (00386) H shares (without moats) was raised by 3.6%, from 5.5 Hong Kong dollars to 5.7 Hong Kong dollars. The valuation of A-shares remains unchanged at 5 Chinese yuan. The report stated that due to the decrease in oil prices, weak downstream demand, and impairment losses, Sinopec's net profit in 2025 is expected to decrease by 34% to 32.5 billion yuan. The dividend of 0.2 yuan per share implies a payout ratio of approximately 75%. Sinopec's 2026 performance guidance shows that oil and gas production will increase by 0.2%, refinery throughput will remain flat, domestic sales of refined oil will decrease by 4.3%, and ethylene production will increase by 3.4%, reflecting the impact of aging oil fields and the transition to electric vehicles. Due to the impact of the Middle East conflict, Brent crude oil prices have exceeded $100 per barrel. The bank expects Sinopec's first-quarter performance to benefit from improved upstream profits and inventory growth. However, if supply disruptions continue, the bank believes refining margins will face downside risks. Sinopec also faces pressures such as rising freight costs, controlled prices of refined oil, and potential export restrictions, although management points out that current crude oil and refined oil inventories are sufficient to support normal operations.