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<Research>CLSA: SINOPEC CORP Share Price Has Lagged behind Peers Since Israel-Iran Conflict, Reflecting Fundamental Divergence; Sector Top Pick PETROCHINA
Recommend 10 Positive 16 Negative 11 |
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Since the outbreak of the US/ Israel-Iran conflict in March, SINOPEC CORP (00386.HK) lagged behind PETROCHINA (00857.HK) and CNOOC (00883.HK) by 29% and 18%, respectively, CLSA said in its report. This reflects the divergence in underlying earnings among the "three oils" amid soaring oil prices. The broker expected this divergence trend to persist as the announcement of 2Q26 results in August approaches. Its order of preference among China's oil giants remains PETROCHINA > CNOOC > SINOPEC CORP. With the average oil price reaching USD117/ bbl in 2Q26 to date (+44% QoQ), the impact on SINOPEC CORP's downstream business could be more severe. Its 2Q refining profit will be affected by the NDRC's slower adjustments to domestic gasoline and diesel retail prices, which will squeeze refining margins as oil prices rise. In addition, the closure of the Strait of Hormuz has prompted an upsurge in VLCC freight rates, adding extra costs to its crude imports amid soaring oil prices. Against this backdrop, CLSA believed SINOPEC CORP could swing to an overall loss in 2Q26. CLSA noted that this will in turn affect dividend distributions for 2026. On the back of strong exploration and production earnings, PETROCHINA and CNOOC should record stronger operating cash flow, providing greater room to increase dividend payouts. By contrast, SINOPEC CORP may face pressure on operating cash flow owing to downstream challenges, potentially affecting its ability to maintain dividend payouts in 2026. CLSA rated the H shares of all three oils as Outperform, with TP at HKD12 for PETROCHINA, HKD32 for CNOOC and HKD4.9 for SINOPEC CORP. Auto-translated by AI This article was automatically translated by AI, the original language version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. More Details
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