Tianfeng Securities·2025-08-03 06:46Investment Rating - Industry rating: Outperform the market (maintained rating) [2] Core Insights - The marginal improvement in Sinopec's ROE shows positive signals from three main aspects: policy dividends reversing the "involution" in the chemical industry, the acceleration of refined oil consumption tax reform, and the alleviation of adverse factors such as high oil prices [8][15][21]. Summary by Sections 1. Sinopec's ROE Marginal Improvement - Sinopec's ROE is currently at a historically low level, with an average oil price of $80 per barrel in 2024, while the ROE level is only 6.2%. This is attributed to significant capacity growth in the domestic petrochemical sector over the past decade, leading to overcapacity and low profitability [8][9]. 2. Policy Dividends - The frequent introduction of "anti-involution" policies aims to improve the structure and supply of the petrochemical industry, eliminating backward production capacity and enhancing the competitive landscape [15][16]. 3. Reform of Refined Oil Consumption Tax - The reform of the refined oil consumption tax is expected to accelerate, with the government aiming to stimulate domestic demand and optimize the tax system. The consumption tax on refined oil is projected to be around 520 billion, making it the second-largest tax category [21][22][25]. 4. Alleviation of Adverse Factors - The supply of crude oil is expected to remain loose, with Brent oil prices fluctuating around $60-$80 per barrel, which is considered a comfortable range for Sinopec's performance [15][37]. 5. Historical Impact of Local Refineries - Local refineries have historically pressured Sinopec's market share and profit margins due to their lower prices and tax evasion practices. However, recent reforms are expected to reduce the market presence of these local refineries [26][30]. 6. Performance Elasticity under Different Oil Prices - The performance of Sinopec is expected to improve significantly when Brent oil prices are in the $60-$80 range, with the best performance projected at $70 per barrel, estimating a net profit of 465 billion and 621 billion for 2025 and 2026 respectively [40][42].