Bank of America: Sinopec’s third-quarter refining turnaround lifts profit above expectations; marketing and chemicals remain under pressure

Why did third-quarter earnings beat expectations?

In the third quarter of 2026, Sinopec’s net profit attributable to shareholders under International Financial Reporting Standards was 13.6 billion yuan, up 64% year on year and 54% quarter on quarter, exceeding Bank of America and market expectations. Attributable net profit for the first three quarters was 40 billion yuan, up 25% year on year.
Refining was the main driver: third-quarter earnings before interest and tax were 12.6 billion yuan, 2.4 times higher than a year earlier, and swung to a profit from a loss of 1.4 billion yuan in the second quarter.

Bank of America attributed the quarter-on-quarter improvement to higher throughput, better economics for kerosene and by-products, refined oil product export arbitrage, and an inventory gain of 900 million yuan.
Third-quarter crude throughput was 54.1 million tonnes, up 5% quarter on quarter but still down 19% year on year. Combined gasoline, diesel and kerosene output was 33.8 million tonnes, up 9% quarter on quarter and down 15% year on year.
China’s refining margin and diesel export arbitrage averaged 17.1 dollars and 54 dollars per barrel, respectively, in the third quarter, increases of 3 dollars and 25 dollars from the second quarter.

The marketing business posted third-quarter earnings before interest and tax of 2.2 billion yuan, down 35% year on year and 16% quarter on quarter, including an inventory loss of 2.3 billion yuan; it recorded an inventory gain in the second quarter.
Domestic and total refined oil product sales were 40 million and 51 million tonnes, respectively, both up 12% quarter on quarter but down 13% and 14% year on year, respectively. The chemicals business recorded a loss before interest and tax of 1.1 billion yuan, compared with a profit of 800 million yuan in the second quarter; ethylene output rose 5% quarter on quarter and fell 26% year on year.
The oil and gas exploration and production business posted earnings before interest and tax of 12.4 billion yuan, down 1% year on year and 27% quarter on quarter. Bank of America estimated the realized oil price at 82 dollars per barrel, up 31% year on year but down 11% quarter on quarter.

Operating cash flow for the first three quarters was 162 billion yuan, up 41% year on year; capital expenditure was 75 billion yuan, up 4% year on year and equivalent to 57% of the full-year budget.
Bank of America raised its Brent oil price assumptions for the fourth quarter of 2026 and for 2027 to 100 dollars and 80 dollars per barrel, respectively, and raised its 2026 attributable net profit forecast by 18% to 56 billion yuan. Its 2027 forecast was unchanged.
Bank of America maintained buy ratings on the A and H shares, raising its H-share price target from 5.5 Hong Kong dollars to 6 Hong Kong dollars and its A-share target from 6.4 yuan to 7 yuan. The H-share target uses a sum-of-the-parts valuation, with upstream cash flows valued using a long-term oil price of 70 dollars per barrel; the A-share target is derived using an 30% A-share premium over H shares.