[CSC Chemical] Hengyi Petrochemical Recommendation: Short-Term Profitability Improving, Long-Term Growth Prospects

English summary

US-Iran conflict reignites, high profitability likely to persist. The US-Iran war has damaged Middle East capacity, Russia restricted refined oil exports, and combined with lower utilization of Southeast Asian refineries, Southeast Asia's oil shortage may continue after the war ends, and the duration of high spreads may be extended. Under normal conditions, Singapore diesel crack is about $15-20/barrel. After the US-Iran war broke out in March, the Singapore diesel crack spread peaked above $150/barrel, boosting the company's Q2 performance. In Q3, the US-Iran conflict reignites, and Southeast Asian oil product supply is expected to return to wartime levels. Current crack spread is about $60/barrel, profit expectations have reversed again, and Q3 is expected to maintain high profitability. Sufficient growth potential and long-term space are promising. The company currently has three major projects advancing: ①Brunei Refining Phase II: the 12 million tons/year refining project continues to advance, can process heavy oil with cost advantages, and has logistics advantages due to Southeast Asia location, expected to be fully operational by March 2029.…