Hengyi Petrochemical's forecast of a 23-fold surge in H1 net profit has forced the market to reassess the value ceiling of refining and chemical fiber enterprises. On the evening of June 25, the company announced an expected net profit attributable to shareholders of RMB 5.5-6.0 billion for the first half of 2026, a year-on-year increase of 2326% to 2547%. This figure not only sets a new company record but also stands out in the entire petrochemical and chemical fiber sector.
Dual Engines Behind the Performance
Hengyi's profit explosion is not driven by a single factor. In Q1, net profit reached RMB 1.995 billion, a staggering 3773.77% YoY increase, laying a strong foundation. In Q2, net profit continued to climb sequentially, estimated at RMB 3.505-4.005 billion, up 76%-101% from Q1.
The core engine is the Brunei refining project. Southeast Asia's refined oil market has long been in a state of tight supply-demand balance, and spreads widened significantly in early 2026. The Brunei refinery, benefiting from tax incentives, market-based pricing, and low freight and insurance costs, achieved full production and full sales, maintaining high per-ton product profitability. This is a unique moat for Hengyi as the only domestic chemical fiber company with an overseas refinery.
Meanwhile, the 'anti-involution' efforts in the domestic PTA and polyester industries are paying off, with optimized capacity structures leading to profit recovery. The release of capacity in the nylon chain also contributed incremental profit.
Three Major Projects Reshaping the Landscape
Beyond short-term performance, Hengyi is betting on a longer growth curve. Three strategic projects are advancing in parallel, aiming to fundamentally change the company's asset and product structure.
- Brunei Phase II: Capacity optimized to 12 million tons/year, producing high-value products like diesel, PX, and benzene, targeting completion by end-2028. Total Brunei capacity will then reach 20 million tons/year, making it the only overseas capacity addition among private refineries in recent years.
- Xinjiang Coal-to-Ethylene Glycol: Plans to produce 2.4 million tons/year of high-quality fiber-grade coal-based ethylene glycol, expected to start production in H1 2028, aiming to open a feedstock channel between coal chemicals and polyester fiber.
- Hubei Jingzhou Circular New Materials: A 300,000 tons/year circular new materials demonstration project using waste textiles instead of crude oil as feedstock, with a construction period of only 18 months. This project directly responds to national carbon neutrality and waste textile recycling policies.
Once these projects are realized, Hengyi will form a three-pronged feedstock system of 'oil, coal, and fabric,' reducing dependence on a single crude oil source and enhancing profit stability across the entire industry chain.
Can the High Boom Last?
The market's key question is whether the 23-fold growth is a cyclical pulse or a value leap. From an industry logic perspective, the tight supply-demand balance in Southeast Asian refined oil is unlikely to reverse quickly, and the Brunei refinery's high profitability is expected to last through the year. PTA and polyester capacity has been substantially cleared, and profit recovery is sustainable. The ramp-up of the nylon project will also provide additional support.
However, risks cannot be ignored. A sharp drop in international crude oil prices would directly impact crack spreads and cause inventory write-downs. The Brunei Phase II and coal-to-ethylene glycol projects are large-scale with long construction periods, posing risks of delays and capital strain. Concentrating core capacity in a single region like Brunei exposes the company to changes in host country policies and geopolitical environment. Additionally, weaker-than-expected downstream textile demand would drag on polyester profitability.