Investment Rating - The report maintains an "Accumulate" rating for both A and H shares of the company [7] Core Views - The refining sector remains under pressure, with a forecasted decline in net profit for H1 2025 by 39.5%-43.7% year-on-year, primarily due to weak industry conditions [1] - The company's upstream performance is negatively impacted by a significant drop in international oil prices, with Brent crude averaging $66.7 per barrel in Q2 2025, down 21.5% year-on-year [2] - Domestic demand for refined oil products is being squeezed by the rise of new energy vehicles, leading to a decrease in gasoline and diesel consumption by 7.2% and 5.0% respectively in the first half of 2025 [3] - The chemical sector is facing margin pressure due to weak supply-demand dynamics, although capital expenditure is expected to stabilize, potentially leading to a market recovery [4] - The company's net profit forecasts for 2025-2027 have been revised downwards by 27% for 2025, reflecting the impact of lower oil prices and refining margins [5] Summary by Sections Financial Performance - The company expects a net profit of RMB 201-216 billion for H1 2025, with a significant drop in Q2 net profit anticipated at RMB 68-83 billion [1] - Oil processing volume decreased by 5.3% to 120 million tons in H1 2025, with total refined oil sales down 3.4% to 87.1 million tons [3] Production and Pricing - The company's crude oil production slightly decreased by 0.3% to 140 million barrels in H1 2025, while natural gas production increased by 5.1% to 736.3 billion cubic feet [2] - The average price of gasoline and diesel is expected to decline, with the company adjusting its sales volume and pricing assumptions accordingly [5][15] Capital Expenditure and Market Outlook - The chemical segment's capital expenditure is projected to remain stable at RMB 449 billion, focusing on ethylene and high-end materials [4] - The report suggests that the market may see a recovery as capital expenditure growth reaches a turning point, aided by policies aimed at optimizing supply dynamics [4] Valuation and Price Target - The target price for A shares is set at RMB 6.72 and for H shares at HKD 4.92, reflecting a valuation based on integrated advantages and a lower sensitivity to oil price fluctuations [5][8]