A 23-fold surge in half-year net profit for a chemical fiber company is rare in any industrial cycle. Hengyi Petrochemical's performance forecast on June 25 shows net profit attributable to shareholders in the first half of 2026 is expected to be between 5.5 billion and 6 billion yuan, up 2,326% to 2,546% year-on-year. This is not a random spike but the crystallization of a series of strategic moves.
Refining Dividends: Southeast Asia's Supply-Demand Gap is the Key Variable
The core driver of the earnings explosion is the Brunei refining project. According to public industry data, the spread in Southeast Asian oil product markets widened significantly in Q1 2026. Hengyi's Brunei refinery, benefiting from tax incentives, market-based pricing, and low freight costs, achieved full production and sales. In Q2 alone, net profit reached 3.5 billion to 4 billion yuan, up 76% to 101% quarter-on-quarter, a record high.
The root of this profitability lies in the persistently tight supply-demand balance for oil products in Southeast Asia. Regional refining capacity growth is limited, while demand rises steadily with economic growth, keeping cracking spreads consistently higher than in China. Among domestic chemical fiber companies, only Hengyi has locked in this spread window overseas. The high per-ton product profit of the Brunei refinery has become the anchor for the company's current and future growth.
Three Major Projects: From 'Refining-Chemical Fiber Leader' to 'Oil-Coal-Fabric Integration'
Beyond the profit surge, three strategic projects under construction deserve more attention. They will fundamentally change the company's industrial DNA.
- Brunei Refining Phase II: Designed capacity of 12 million tons/year, mainly producing diesel, PX, and benzene, targeting completion by end of 2028. Total capacity at Brunei will then reach 20 million tons/year. This is the only overseas capacity addition among private mega-refineries in recent years.
- Xinjiang Coal-to-Ethylene Glycol Project: Planned annual output of 2.4 million tons of high-quality fiber-grade coal-to-EG, expected to start production in H1 2028, aiming to reduce reliance on crude oil.
- Hubei Jingzhou Recycling New Materials Project: Uses waste textiles instead of crude oil as feedstock, with an annual capacity of 300,000 tons of recycled new materials. The construction period is 18 months, directly aligning with the national 'dual carbon' strategy.
Once these projects are completed, Hengyi will form a three-pronged feedstock structure of 'oil, coal, and fabric.' This means that regardless of crude oil price fluctuations, the company can hedge cost risks through coal chemicals and waste textile recycling, significantly improving the stability of the entire value chain.
Polyester & Nylon: Dual-Chain Recovery Boosts Profit Repair
Refining is the star, but the polyester and nylon segments also contribute. In H1 2026, the capacity landscape for PTA and polyester has been substantively optimized, with the 'anti-involution' effect showing, making profit repair sustainable. Meanwhile, capacity release in the nylon chain provides additional profit growth.
Data shows that in Q1, Hengyi's non-recurring net profit surged 23,640% year-on-year, indicating rapid improvement in core business profitability. Q2 continued this trend, with recovering polyester demand and the ramp-up of nylon projects forming a dual engine.
Risks and Concerns: High Growth is Not Without Cost
The market's key question is: can this high growth continue? The answer requires multi-dimensional scrutiny.
- Crude oil price volatility: A sharp drop could lead to inventory write-downs, and narrowing cracking spreads would directly impact refining profits.
- Project execution risk: Phase II and the coal-to-EG project are large-scale and long-cycle, with potential for delays or funding pressure.
- Geopolitical and policy risk: Core capacity is concentrated in a single region (Brunei). Changes in host country policy or geopolitical environment could affect feedstock supply stability.
- Downstream demand uncertainty: If textile demand falls short, the pace of polyester profit repair will be disrupted.
From an industry logic perspective, the tight supply-demand for Southeast Asian oil products is unlikely to reverse quickly, and Brunei's high profitability should last through the year. Polyester capacity optimization has entered a substantive phase, and profit repair is sustainable. Coupled with the nylon project ramp-up, the full-year profit center will be permanently elevated compared to previous years.