Investment Rating - The report maintains a "Strong Buy" rating for the company with a target price of 13.53 CNY [2][7]. Core Views - The company reported a revenue of 148.63 billion CNY for the first half of 2025, a decrease of 7.83% year-on-year, and a net profit attributable to shareholders of 0.60 billion CNY, down 29.82% year-on-year. The second quarter saw revenues of 73.65 billion CNY, with a year-on-year decline of 8.12% and a quarter-on-quarter decline of 1.76% [2]. - The report highlights that the company is currently facing short-term profit pressure but is expected to benefit from a recovery in refining and chemical sectors in the future [2][6]. - The company is actively working on capacity expansion projects, including a 250,000-ton functional polyester film expansion project and a 1.4 million-ton ethylene and downstream chemical facility, which are expected to enhance its competitive edge [2][6]. - The report anticipates a gradual recovery in profitability, projecting net profits of 2.30 billion CNY, 4.26 billion CNY, and 5.29 billion CNY for 2025, 2026, and 2027 respectively, with corresponding P/E ratios of 42x, 23x, and 18x [2][8]. Financial Summary - The company’s total revenue for 2024 is projected at 326.48 billion CNY, with a year-on-year growth rate of 0.4%. For 2025, revenue is expected to decline to 297.01 billion CNY, reflecting a 9.0% decrease [2][8]. - The net profit attributable to shareholders is forecasted to be 724 million CNY in 2024, with a significant rebound to 2.30 billion CNY in 2025, representing a growth rate of 217.6% [2][8]. - The company’s gross margin for refining products is reported at 22.59%, while the chemical products margin stands at 12.08%, indicating a mixed performance across segments [2][6]. Market Position - The company has a total market capitalization of approximately 97.60 billion CNY, with a circulating market value of about 91.47 billion CNY [3]. - The asset-liability ratio is reported at 75.12%, indicating a high level of leverage [3]. Future Outlook - The report suggests that the company is well-positioned to benefit from industry reforms aimed at optimizing supply and eliminating outdated capacity, which could enhance its profitability in the long run [2][6]. - The ongoing projects and strategic initiatives are expected to strengthen the company's market position and operational efficiency [2][6].

Group 1 - The petrochemical industry in China is facing structural overcapacity challenges due to peak demand and declining refined oil needs, leading to excess refining capacity and overproduction of chemicals like ethylene and aromatics [1] - The average profit percentile for major chemical products in the first half of 2025 is expected to be below 50%, with PDH profits dropping to a historical low of 0% [1] - The industry needs to eliminate outdated capacity and tighten new project approvals to achieve high-quality transformation [1] Group 2 - The refining sector is experiencing peak demand and decline in refined oil, necessitating a net elimination of capacity during the 14th Five-Year Plan, rather than just controlling new capacity [2] - The ethylene sector is facing overcapacity due to new oil conversion capacities and requires control over new capacity and project approvals, as well as the elimination of small projects that do not meet energy and carbon standards [2] - Unlike coal, which may not have absolute overcapacity but requires control over operating rates, the petrochemical sector is experiencing overcapacity that necessitates capacity reduction and new project approval controls [2]