A 23-fold surge in semi-annual net profit for a leading polyester-refining firm is rare even in the cyclically volatile petrochemical-textile chain. Hengyi Petrochemical's June 25 earnings guidance shows H1 2026 net profit attributable to shareholders is expected at RMB 5.5-6 billion, up 2,326%-2,547% year-on-year. This means its single-quarter profit approaches the annual earnings of some peers.
Structural Logic Behind Profit Explosion
Breaking down the data, Q1 net profit reached RMB 1.995 billion, up 3,773.77% YoY, with recurring profit surging 236-fold. In Q2, net profit further climbed to RMB 3.5-4 billion, up 76%-101% quarter-on-quarter. This acceleration is no accident—the supply-demand imbalance in Southeast Asian refined oil products is generating supernormal profits for the Brunei refining project.
CITIC Securities notes that Southeast Asia faces a chronic shortage of refined oil supply, with crack spreads widening sharply in Q1 2026, directly boosting refining margins. Unlike domestic refineries, Hengyi's Brunei project enjoys tax incentives, market-based pricing, and low freight costs, maintaining high per-ton profitability for refined products. Meanwhile, paraxylene (PX) and benzene prices remain strong, further solidifying the profit base.
From a chain perspective, the 'anti-involution' process in PTA and polyester is accelerating. Capacity exits and supply-demand optimization make polyester margin recovery sustainable. Combined with nylon chain capacity release, Hengyi's chemical fiber profit contribution is also rising. This 'refining + chemical fiber' dual-engine structure gives it far greater elasticity than peers during an upcycle.
Three Mega-Projects: From Refining Leader to 'Oil-Coal-Textile' Integration
Beyond profit growth, three strategic projects under construction deserve industry attention. Once realized, they will fundamentally transform the company's asset structure and profit model.
Brunei Phase II is fully launched, with optimized design capacity of 12 million tons/year, producing diesel, PX, and benzene. It targets completion by end-2028, bringing total Brunei capacity to 20 million tons/year. This represents the only overseas capacity addition among private mega-refiners in recent years, with high strategic scarcity given limited Southeast Asian refining expansion.
The Xinjiang coal-to-ethylene glycol project plans 2.4 million tons/year of high-quality fiber-grade MEG, expected online by H1 2028. This directly addresses China's 'coal-rich, oil-poor' feedstock structure—replacing traditional naphtha-based MEG with coal chemical routes reduces crude import dependence and offers cost advantages when oil prices are high.
The Hubei circular new materials project targets waste textile recycling. It plans a 300,000 tons/year demonstration project using waste textiles as feedstock instead of crude, with an 18-month construction period. Aligned with China's 'dual carbon' strategy and waste textile recycling policies, once scaled, it will give Hengyi a unique 'oil, coal, textile' parallel industrial structure.
Sustainability of High Prosperity: Short-Term Certainty vs. Medium-Term Variables
The market's core question: is the 23-fold profit surge a cyclical pulse or a trend shift? From an industry logic perspective, the Southeast Asian refined oil supply-demand tightness is unlikely to reverse quickly. Regional refining capacity additions are limited, while demand is supported by economic growth and shipping trade, keeping crack spreads elevated. This means the Brunei project's profit contribution has strong certainty for full-year 2026.
The PTA and polyester industry capacity structure has substantially optimized. Over the past two years, many obsolete capacities exited, pushing operating rates to reasonable levels, making margin recovery sustainable. Nylon project ramp-up will also add new profit drivers. Overall, Hengyi's full-year profit center will see a permanent upward shift versus historical levels.
However, risks are equally real.
- Crude oil price volatility: sharp price drops could cause inventory write-downs, and narrowing crack spreads directly hit refining margins.
- Project execution risks: Brunei Phase II and coal-to-EG projects are capital-intensive with long construction periods, facing potential delays and funding pressure.
- Geopolitical risks: core refining capacity concentrated in Brunei makes it vulnerable to host country policy changes or regional conflicts, impacting cost advantages and feedstock supply stability.
- Downstream demand risk: if global textile and apparel demand disappoints, polyester margin recovery could slow.
Implications for the Chain
Hengyi's case offers three key lessons for the entire polyester-refining industry.
First, overseas refining positions are becoming 'ballast stones' to navigate domestic cycle volatility. Amid China's refining overcapacity and thin margins, Southeast Asia's supply gap offers excess return windows for firms with global capabilities.
Second, feedstock diversification is the core path to reducing cycle volatility. Shifting from sole crude dependence to a parallel 'oil, coal, textile' route systematically enhances supply chain resilience. Coal-to-EG and waste textile recycling offer differentiated competitiveness from cost and policy angles.
Third, as industry concentration rises, leaders widen gaps with smaller players through capital expenditure. The three projects involve billions in investment, creating financial and construction barriers that drive industry consolidation.