A leading chemical fiber company reported a net profit exceeding RMB 5.5 billion in the first half of the year, with a year-on-year increase of over 23 times. This is not a normal cyclical fluctuation but a demonstration of the remarkable elasticity of overseas refining assets under specific supply-demand dynamics. Hengyi Petrochemical's semi-annual performance forecast for 2026 shows attributable net profit expected to be between RMB 5.5 billion and 6.0 billion, up 2,326% to 2,547% year-on-year.
Profit Structure Breakdown: Brunei Refining is the Absolute Main Driver
In Q1, Hengyi had already achieved attributable net profit of RMB 1.995 billion, up 3,773% YoY. Q2 accelerated further, with single-quarter net profit of about RMB 3.5-4.0 billion, up 76%-101% quarter-on-quarter. From a profit structure perspective, the Brunei refining project is the absolute core. The tight supply-demand situation for refined oil products in Southeast Asia has kept local refining spreads significantly higher than in China. Combined with Brunei's tax incentives, market-based pricing, and lower freight and insurance costs, the project has achieved full production and sales, with high per-ton profitability sustained.
Capacity release from the nylon chain and a recovery in the polyester market also contributed incremental gains, but their scale remains small compared to the Brunei project. This means Hengyi's profits are highly concentrated in a single overseas project, with performance volatility deeply tied to the Southeast Asian refined oil product market.
Three Major Projects Under Construction: Upgrading from 'Refining-Chemical Fiber' to 'Oil-Coal-Fabric' Integration
Hengyi is currently advancing three strategic projects aimed at reducing dependence on a single crude oil route and building a more stable profit structure.
- Brunei Phase II: Designed capacity of 12 million tons/year, targeting completion by end-2028, bringing total Brunei capacity to 20 million tons/year. This is the only overseas capacity addition among private large-scale refineries in recent years.
- Xinjiang Coal-to-Ethylene Glycol: Annual production of 2.4 million tons of high-quality fiber-grade coal-to-ethylene glycol, expected to commence production in H1 2028.
- Hubei Jingzhou Recycling New Materials: A 300,000 tons/year demonstration project using waste textiles as raw material, with an 18-month construction period, aligning with 'dual carbon' and circular economy policies.
Once these projects are completed, Hengyi will form a three-pronged raw material structure of 'oil, coal, and fabric'. For buyers, this means Hengyi's future cost structure for PTA and polyester products could have stronger anti-volatility capabilities, especially coal-to-ethylene glycol and recycled waste textile routes, which may create differentiated competitiveness on the raw material side.
Can High Prosperity Last? Opportunities and Risks from an Industry Perspective
The market is broadly concerned about whether Hengyi's high growth can be sustained. From an industry logic standpoint, the tight supply-demand situation for refined oil products in Southeast Asia is unlikely to reverse quickly, and high profitability at Brunei is expected to last through the year. The PTA and polyester industry capacity structure has been substantively optimized, with profit recovery having sustainability. The nylon project continues to ramp up, and the full-year profit center will be permanently elevated compared to previous years.
However, risks cannot be ignored:
- Sharp fluctuations in international crude oil prices could lead to inventory write-downs and narrowing crack spreads, directly impacting refining profitability.
- Projects like Brunei Phase II and coal-to-ethylene glycol involve large investments and long construction periods, posing risks of delayed start-up and financial strain.
- Concentration of core refining capacity in a single region (Brunei) exposes the company to changes in host country policies and geopolitical environment, which could impact cost advantages and raw material supply stability.
- If downstream textile demand falls short of expectations, it will affect the pace of profit recovery in the polyester segment.