HSBC Research lowers Sinopec's target price to 4.4 yuan and adjusts profit forecast downward due to disappointing performance

HSBC Research published a report indicating that Sinopec (00386.HK) performed below expectations last year, primarily due to an expanded loss in its chemical business, resulting in a 30% reduction in dividends per share, even though the payout ratio increased to 75%. The bank expects downstream profitability to remain weak, and in the second quarter of this year, it will be further pressured by rising crude oil and logistics costs, along with temporary interventions by the National Development and Reform Commission on refined oil prices.

The bank estimates that if the relevant intervention measures are maintained for a month, it could have a negative impact of up to 20% on Sinopec's net profit in 2026. Considering the weakening refining margins, HSBC Research has lowered its earnings forecast for Sinopec for 2026 to 2027 by 8% to 31%.

HSBC Research maintains a "Hold" rating on Sinopec's H shares, with a target price reduced from HKD 5.6 to HKD 4.4. The bank believes that the upside potential for shareholder returns is limited, but the share buyback plan can provide support for the stock price and reduce downside risks