Refining provides the credit lift; initiating on SAMTOT‘29 with Overweight

Research evidence excerpt

Refining provides the credit lift; initiating on SAMTOT‘29 with Overweight

g Kong)

contrast, petrochemical remains challenging. The ethylene–naphtha spread had retraced +852 3508 3100

sirius.chan@bofa.com

to US$147/MT by July, close to its pre-escalation level in Jan’26, as continued capacity

additions kept regional markets oversupplied. We expect HTP’s petrochemical to remain

loss-making. Nevertheless, refining earnings should more than offset these losses

through 2H26 and 1H27, allowing it to generate positive free cash flow and reduce debt.

HTP/SAMTOT: Hanwha Totalenergies

Deleveraging should contain rating pressure Petrochemical Co Ltd

HTP reported KRW460bn of EBITDA in 1Q26, more than 50 times the 1Q25 level.

Bbl: barrelMaintenance-oriented capex and the continued dividend suspension should support

positive free cash flow and debt reduction, with net leverage declining <4x and gross MT: metric tonne

leverage <5x in 2026. Leverage may rise modestly in 2027 as refining margins

normalize, but we expect credit metrics to remain within rating tolerance and materially YTM: yield to maturity

stronger than in 2025 (Exhibit 3). This should contain near-term downgrade risk.

Ticker dictionary in Exhibit 18

OW SAMTOT’29: attractive carry with credit upside

At a mid-YTM of 6.35%, SAMTOT’29 (Ba1/Neg by Moody’s, BBB-/Neg by S&P) trades at

the wide end of Asian solid BB credits and offers more than 40bp of yield pick-up over

global strong BB refining or integrated chemical peers, despite HTP’s leverage being at

the lower end of the peer range. We see room for further yield tightening from expected

earnings recovery. Additional upside could arise from revision of rating outlook to stable

if refining margins remain supportive or petrochemical conditions stabilize in 2027.