A semi-annual earnings forecast from a leading chemical fiber company has refocused industry attention on the rare track of 'overseas refining'. Hengyi Petrochemical announced that its net profit attributable to shareholders for the first half of 2026 is expected to be between 5.5 billion and 6.0 billion yuan, a year-on-year increase of 2326% to 2547%. This figure is not only a record for the company itself but also reflects the accelerating strategic value of China's chemical fiber industry chain extending upstream to raw materials.
Refining Overseas: The Core Engine of Profit Explosion
Hengyi's profit surge is no accident. In Q1, its net profit had already reached 1.995 billion yuan, up 3774% year-on-year. In Q2, quarterly profit is expected to increase by another 76% to 101% sequentially, reaching 3.5 to 4.0 billion yuan. Two consecutive quarters of high-slope growth point to the same profit source: the Brunei refinery project.
The Southeast Asian oil product market has long been in a state of tight supply, with a clear regional refining capacity gap. Hengyi's Brunei refinery not only enjoys local tax incentives and market-based pricing mechanisms but also benefits from lower freight and insurance costs due to its proximity to raw material sources. In the first half of 2026, the refinery operated at full capacity with full sales, maintaining high per-ton product profitability. For domestic peers, this forms a difficult-to-replicate 'profit moat': while domestic PTA and polyester segments still suffer from overcapacity and thin margins, the Brunei project captures dual premiums from both oil products and chemicals.
Three Major Projects Under Construction: From 'Refining Leader' to 'Oil-Coal-Textile Integration'
Beyond the high profit growth, what deserves more attention are the three strategic paths Hengyi is laying out. The second phase of the Brunei refinery project has been fully launched, with an optimized design capacity of 12 million tons per year, targeting completion by the end of 2028. By then, the total capacity of the Brunei refinery will reach 20 million tons per year, making it the only overseas capacity addition among private large-scale refineries in recent years.
Simultaneously, 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. This layout directly targets raw material source diversification: using abundant domestic coal resources to partially replace crude oil for chemical fiber raw materials, reducing dependence on a single petroleum route.
The Hubei Jingzhou circular new materials project is even more forward-looking. It plans to build a 300,000-ton annual capacity demonstration facility for recycling waste textiles, with a construction period of only 18 months. Driven by the national 'dual carbon' strategy and policies for waste textile recycling, once this project is implemented, Hengyi will form a 'oil, coal, and textile' three-source raw material system, fundamentally enhancing the profit stability of the entire industry chain.
Industry Impact: PTA/Polyester Structure Optimization and Nylon Capacity Release
Hengyi's profit surge is not an isolated event. It also benefits from the ongoing 'anti-involution' in the PTA and polyester industries. Over the past two years, domestic PTA capacity growth has slowed, some high-cost units have exited, and the industry's supply-demand structure has improved substantially, with processing fees recovering from the bottom. As a leading producer of PTA and polyester, Hengyi naturally shares in this recovery dividend.
Additionally, the release of capacity in its nylon (polyamide) chain is contributing incremental profits. Nylon, as a differentiated chemical fiber variety, has seen steady demand growth in sportswear, outdoor gear, and other segments, with gross margins better than conventional polyester products. Hengyi's layout in the nylon segment adds another layer of resilience to its profit structure.
Can High Prosperity Continue? Risks and Opportunities Coexist
The market's biggest question is: can the 23-fold profit growth be sustained? From an industry logic perspective, the tight supply-demand situation for Southeast Asian oil products is unlikely to reverse in the short term, and high profitability from the Brunei refinery can at least be maintained for the full year. The profit recovery in the PTA and polyester segments is also sustainable. However, risks cannot be ignored.
- A sharp decline in international oil prices could lead to inventory write-down pressure, and narrowing crack spreads would directly impact refining profits.
- The second phase of the Brunei project and the coal-to-ethylene glycol project involve large investments and long construction periods, posing risks of delayed production or cost overruns.
- Concentrating core refining capacity in a single region like Brunei exposes the company to potential policy or geopolitical changes that could affect cost advantages and raw material supply stability.
- If downstream textile demand falls short of expectations, the pace of profit recovery in the polyester segment could be interrupted.