BOC International: Downgraded SINOPEC SEG (02386) target price to HKD 5.85, first half fiscal year performance below expectations.

CICC released a research report stating that SINOPEC SEG (02386) reported first-half performance for the fiscal year 2026 that fell short of expectations, with anticipated earnings in the second half expected to decline quarter-on-quarter. The earnings forecast for the fiscal years 2026 to 2028 has been revised down by 6-10%. The rating has been reiterated as "Hold," and the target price has been lowered to HKD 5.85. The report indicated that the company's profit for the first half of the fiscal year 2026 decreased by 18% year-on-year to CNY 1.137 billion, which is 20% lower than the bank's expectation. The disappointing performance is primarily attributed to profit margins that were below expectations. The bank currently anticipates a quarter-on-quarter profit decline of 10% for the second half of fiscal year 2026. Although the two construction contracts in Saudi Arabia are expected not to incur losses, the negative impact of RMB appreciation remains, and the company typically incurs more costs in the second half of the year.