In the first half of 2026, Hengyi Petrochemical's net profit attributable to shareholders is expected to reach 5.5 to 6.0 billion yuan, a year-on-year increase of over 23 times, far exceeding market expectations. The profit explosion is no coincidence—the synergy between the Brunei refinery project's location advantage and the industry's supply-demand dynamics is the core driver.
Tight Supply-Demand in Southeast Asia Makes Brunei Refinery the Profit Engine
The Southeast Asian refined oil market has long faced supply shortages. In Q1 2026, product price spreads widened significantly, fully releasing the profit elasticity of the refining sector. Hengyi's Q1 net profit hit 1.995 billion yuan, up more than 37 times year-on-year. In Q2, the Brunei refinery operated at full capacity, with sequential profit growth of 76% to 101% and high per-ton product margins. As the only Chinese chemical fiber leader with an overseas refinery, Hengyi benefits from tax incentives, market-based pricing, and low shipping costs, far outperforming domestic peers.
Overcapacity in the PTA and polyester sectors is easing. Industry anti-competition measures are progressing, optimizing supply-demand dynamics and driving profit recovery. Capacity release in the nylon chain also contributed incremental profits. These factors combined pushed the company's first-half performance to record highs.
Three Major Projects Under Construction Build Long-Term Growth Logic
Hengyi's growth is not purely cyclical. The Brunei Phase II project is fully underway, with optimized capacity of 12 million tons per year, producing high-value products like diesel, PX, and benzene, targeting completion by end-2028. Total Brunei refinery capacity will then reach 20 million tons per year, making it the only overseas incremental capacity among private refineries.
The Xinjiang coal-to-ethylene glycol project plans to produce 2.4 million tons of high-quality fiber-grade ethylene glycol annually, expected to start production in the first half of 2028. The Hubei Jingzhou circular new materials project targets waste textile recycling, with an annual capacity of 300,000 tons. These projects diversify feedstock sources and align with green recycling, freeing the company from sole reliance on crude oil and forming an integrated 'oil-coal-fabric' industrial structure.
This layout signals Hengyi's transformation from a traditional refining-chemical fiber leader to a comprehensive new materials company. Profit sources will expand from single refining to coal chemicals and recycling, significantly enhancing the entire chain's risk resilience.
Can High Prosperity Last? Risks and Opportunities Coexist
The key market question is whether the 23-fold profit surge is sustainable. From an industry perspective, the tight supply-demand balance in Southeast Asian refined oil is unlikely to reverse quickly, supporting high profitability at the Brunei refinery for the full year. The PTA and polyester capacity landscape has been substantially optimized, making profit recovery sustainable. The nylon project's ramp-up will permanently lift the annual profit center compared to previous years.
However, risks remain. A sharp drop in international crude oil prices could directly hit refining spreads and cause inventory write-downs. The large-scale Brunei Phase II and coal-to-ethylene glycol projects involve long construction periods and potential delays or funding pressures. Concentrating core refining capacity in Brunei exposes the company to policy changes or geopolitical shifts in the host country. Additionally, weaker-than-expected downstream textile demand could dampen polyester profit recovery.