Key takeaway
In 3Q26, geopolitical conflicts tightened the global supply of refined products. Overseas refined-product margins widened significantly YoY. Singapore diesel/jet fuel/gasoline margins were USD57.5/USD54.9/USD20.5 per barrel, up USD9.5/USD0.3/USD4.1 per barrel from 2Q26 and USD39.0/USD38.2/USD11.5 per barrel from 2Q25, respectively. This drove a substantial improvement in the profitability of the company's Brunei phase I project. Meanwhile, margins and profitability for the company's PTA and downstream polyester products continued to recover. In addition, the company's new projects, including Brunei phase II and the 2.4mn-tonne-peryear coal-to-ethylene glycol project, are progressing as planned and are expected to provide medium- to long-term growth momentum.
Event
HYPC released its 3Q26 report. In 9M26, the company recorded revenue of RMB108.306bn, up 29.11% YoY, and net profit attributable to shareholders of the parent company of RMB8.011bn, up 3390.70 % YoY. In 3Q26 alone, the company recorded revenue of RMB40.996bn, up 46.81% YoY and 9.73% QoQ, and net profit attributable to shareholders of the parent company of RMB2.109bn, up 82008.05 % YoY but down 46.01% QoQ.
Quick Take
Overseas refined-product margins widened significantly, substantially improving the profitability of Brunei phase I. Since the beginning of 2026, geopolitical tensions in the Middle East and Russia have significantly disrupted the global supply of refined products. The resulting tightening in supply and demand drove a substantial widening of overseas refined-product margins. Based on Brent crude spot prices, Singapore diesel, jet fuel, and gasoline margins were USD57.5/bbl, USD54.9/bbl, and USD20.5/bbl, respectively, in 3Q26.
These were up USD9.5/bbl, USD0.3/bbl, and USD4.1/bbl, respectively, from 2Q26, and up USD39.0/bbl, USD38.2/bbl, and USD11.5/bbl, respectively, from 2Q25. In addition, according to the company's announcement, oil demand in Southeast Asia is expected to increase by approximately 49mn tonnes per year by 2030, accounting for an estimated 39% of total global oil demand growth. Given the substantial supply shortfall in Southeast Asia's refined-product market, the company's Brunei project is expected to continue benefiting.
PTA and polyester margins widened YoY, with the industry landscape expected to continue improving over the medium to long term. Based on data from Baiinfo and OilChem, among other sources, the average domestic PTA margin was RMB554/tonne in 3Q26, up RMB363/tonne YoY and RMB153/tonne QoQ, or 190% YoY and 38% QoQ. In polyester, the domestic POY margin was RMB1,313/tonne in 3Q26, up RMB183/tonne YoY but down RMB43/tonne QoQ. The polyester bottle-chip margin rose RMB115/tonne YoY but fell RMB830/tonne QoQ. Overall, the capacity expansion cycle for PTA and the downstream polyester value chain is nearing its end. Meanwhile, efforts to curb excessive competition are expected to drive continued improvement in the industry landscape. The normalized profitability of PTA and polyester products is expected to continue rising over the medium to long term.
Oil and coal resources advancing in tandem, with new projects progressing steadily. According to the company's announcement, construction of Phase II of the Brunei refining and petrochemical project commenced in full in 2026. The project will add 12mn tonnes of annual refining and petrochemical capacity, mainly producing diesel, PX, BZ, and other high-value-added refined oil and chemical products. Phase II of the Brunei refining and petrochemical project is expected to significantly enhance profitability through feedstock adjustments, higher product yields, and an optimized product mix. The company's Xinjiang coal chemical project is progressing at an accelerated pace. Leveraging Xinjiang's abundant coal resources, the project will replace oil with coal as feedstock to produce high-end chemical products. It is designed to produce 2.4mn tonnes of coal-to-ethylene glycol annually and is expected to commence operations in 1H28. Upon completion, the project will enable the company to secure an independent and stable supply of ethylene glycol, a key raw material for downstream polyester production. It will further strengthen the profitability resilience and risk resistance of the company's integrated value chain and provide new momentum for its sustained and healthy development. Investment recommendation: On the one hand, overseas refined oil product spreads remain elevated amid geopolitical conflicts, benefiting the company's Brunei project. On the other hand, new projects, including Phase II of the Brunei refining and petrochemical project and the coal-to-ethylene glycol project with annual capacity of 2.4mn tonnes, are progressing steadily and are expected to drive the company's medium- to long-term growth. We expect the company to achieve net profit attributable to shareholders of the parent company of RMB10.23bn, RMB9.44bn, and RMB12.08bn in 2026-2028, corresponding to P/E multiples of 5.2x, 5.6x, and 4.4x, respectively. We maintain “Buy” rating.
Risks:
(1) Oil price volatility and geopolitical risks: The production of the company's principal products is highly dependent on crude oil. Geopolitical conflicts in the Middle East have driven a sharp increase in the average crude oil price. The current geopolitical situation remains uncertain, and crude oil prices may continue to fluctuate significantly. This could affect the company's crude oil procurement, as well as the production costs and profitability of downstream refined oil and other refining and petrochemical products.
(2) Project construction and overseas operating policy risks: The company's planned new projects, including Phase II of the Brunei refining and petrochemical project and the Turpan coal-to-ethylene glycol project for high-quality fibers with annual capacity of 2.4mn tonnes, require long construction periods and substantial capital investment. Risks include weaker-than-expected financing and slower-than-expected construction and commissioning progress. Meanwhile, the company is currently developing a refining and chemical project in Brunei. Any material changes in local policies or taxes could adversely affect the normal operation of the company's overseas project.
(3) Risk of worsening competition: Competition is relatively intense for some of the company's main products, including PTA and polyester filament yarn. If new industry capacity exceeds expectations, the oversupply may worsen and undermine the profitability of the company's related products.
(4) Risk of weaker-than-expected downstream demand: A sharp decline in demand for the company's refined oil products or other refining and chemical products could adversely affect its overall profitabil ity.
(5) Foreign exchange fluctuation risk: The company derives a relatively high proportion of its revenue from overseas markets and procures crude oil and other related raw materials overseas. Significant foreign exchange fluctuations could affect its overall raw material procurement costs and operations, thereby adversely affecting the profitability of its products.