When a chemical fiber company's half-year net profit surges 23-fold, it is no longer a simple cyclical fluctuation but a signal of industry restructuring. Hengyi Petrochemical's H1 2026 performance forecast shows net profit attributable to shareholders of 5.5 to 6.0 billion yuan, a year-on-year increase of 2326% to 2547%. Behind this figure lies the dual superposition of Southeast Asian refining dividends and domestic polyester chain recovery.
Southeast Asian Refining: The Continuous Roar of the Profit Engine
The core driver of Hengyi's H1 profit explosion is its Brunei refining project. Located in a market with long-term tight supply of refined oil products in Southeast Asia, the project saw a significant spread widening in Q1 2026, directly boosting refining profitability. Estimates show Q2 net profit reached 3.5 to 4.0 billion yuan, up 76% to 101% quarter-on-quarter. The Brunei refinery benefits from tax incentives, market-based pricing, and lower freight and insurance costs, keeping per-ton product profitability high and making it the core pillar of current and future performance growth.
Notably, Hengyi is the only domestic leading chemical fiber company with an overseas refinery. This first-mover advantage, given the short-term irreversibility of Southeast Asia's refined product supply-demand tightness, suggests its high refining profitability could last through the year. For domestic textile enterprises relying on imported raw materials, Hengyi's overseas layout offers a reference for upstream supply stability.
Three Major Projects: From Single Dependency to Diversified Synergy
Alongside profit growth, Hengyi is accelerating three strategic projects to shed single reliance on crude oil and achieve industrial upgrading. The Brunei Phase II project has been launched with a design capacity of 12 million tons per year, mainly producing diesel and PX, targeting completion by end-2028. This will bring the Brunei refinery's total capacity to 20 million tons per year, making it the only overseas capacity increment among private large-scale 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 H1 2028. This project will bridge coal chemicals and chemical fibers, reducing dependence on petroleum-based feedstocks. More noteworthy is the Hubei Jingzhou recycling new materials project, which plans to build a 300,000-ton annual capacity demonstration project using waste textiles as raw materials, with an 18-month construction period. Aligned with China's 'dual carbon' strategy, this project will create a new 'oil, coal, and fabric' integrated industrial pattern, enhancing profit stability across the value chain.
Risks and Challenges: Concerns Behind High Growth
Despite stellar H1 results, Hengyi faces multiple risks. First, significant crude oil price volatility could cause inventory write-downs and narrow refining margins. Second, the three major projects involve massive investments and long construction periods, posing risks of delayed production or financial strain. Third, concentration of core refining capacity in Brunei exposes the company to host country policy or geopolitical changes that could impact cost advantages and feedstock supply stability.
For downstream textile enterprises, Hengyi's PTA and polyester capacity releases will influence raw material prices. Sustained polyester margin recovery could stabilize chemical fiber raw material markets, but weaker-than-expected downstream textile demand may slow the pace of polyester margin recovery.
Industry Implications: Value Revaluation of Cyclical Stocks
Hengyi's H1 profit growth is not an accidental cyclical pulse but a concentrated release of years of global layout and full-chain deepening. In the short term, favorable industry conditions and capacity expansion provide strong earnings visibility; in the long term, as the three projects come online, the company will transform from a 'refining and chemical fiber leader' into an 'oil-coal-fabric integrated new materials enterprise.'
For the textile industry, Hengyi's case shows that extending upstream and diversifying feedstock sources is an effective way to navigate cyclical fluctuations. Meanwhile, the waste textile recycling project offers a reference business model for green transformation. The market's current revaluation of Hengyi essentially recognizes its earnings certainty and growth sustainability.