China Petroleum & Chemical (0386)

Equity Research 24 August 2026 | 12:53AM HKT

China Petroleum & Chemical (0386.HK): First Take: Moderate 2Q miss on lower distribution and upstream earnings than expected; remain

Moderate 2Q earnings miss. Sinopec’s 2Q EBITDA/EPS is 8%/13% lower than GSe, Amber Cai | respectively (Exhibit 1). The EBITDA miss mainly comes from 1) lower earnings from Goldman Sachs (Asia) L.L.C.

the marketing & distribution segment (Exhibit 2), due to lower-than-expected Nikhil Bhandari | domestic product sales volumes (-19% yoy in 2Q vs. -10% GSe, Exhibit 3), and Goldman Sachs (Singapore) Pte lower-than-expected distribution margins (US$2.8/bbl vs. US$4/bbl GSe); and 2) lower-than-expected upstream earnings (Exhibit 2), partly due to larger discount to Randy Lau | Goldman Sachs (Singapore) Pte Brent prices than expected (Exhibit 3). We wait to hear more from management tomorrow on inventory gains and losses. Despite the earnings miss, 1H dividend per share is in line with GSe, due to moderately higher payout than expected (48% vs. 45% GSe). We continue to see Sinopec’s earnings as negatively correlated with Brent oil prices above US$90/bbl, as China’s domestic fuel pricing policy could squeeze gasoline and diesel margins and make oil price pass-through difficult in 3Q.

2Q FCF increased yoy. 2Q FCF increased 33% yoy mainly due to stronger operational cash flow (e.g. increase in non-cash add-backs, Exhibit 5). 2Q capex decreased by 8% yoy, driven by capex declines in segments like upstream and marketing & distribution, while chemical capex saw an increase yoy. 1H capex has reached 33%~37% of the full year guidance range and is broadly in line with the past-five-year 1H average of 35% (Exhibit 4). The company’s full year capex guidance range remains unchanged.

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Goldman Sachs China Petroleum & Chemical (0386.HK)

Exhibit 1: Summary of Sinopec’s key financial metrics vs. GSe Sinopec Summary Financials Jun-24 Sep-24 Dec-24 Mar-25 Jun-25 Sep-25 Dec-25 Mar-26 Jun-26 Jun-26 Var. Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter %

Revenue mn rmb 786,164 790,410 708,021 735,356 673,696 704,389 670,142 706,695 729,866 749,504 -3% COGS mn rmb (628,296) (643,252) (552,149) (581,879) (536,561) (549,694) (517,865) (526,746) (570,190) (608,460) -6% Gross profit mn rmb 157,868 147,158 155,872 153,477 137,135 154,695 152,277 179,949 159,676 141,044 13% Operating expenses mn rmb (103,961) (104,346) (115,311) (102,363) (93,671) (109,684) (107,500) (122,929) (116,017) (93,671) 24% EBITDA mn rmb 53,907 42,812 40,561 51,114 43,464 45,011 44,777 57,020 43,659 47,373 -8% DD&A mn rmb (30,206) (30,242) (31,054) (30,219) (30,936) (31,743) (34,273) (31,289) (32,180) (31,990) 1% EBIT mn rmb 23,701 12,570 9,507 20,895 12,528 13,268 10,504 25,731 11,479 15,383 -25% Non-operating income/ (losses) mn rmb 929 (1,110) (2,126) (1, ,429) (727) 1,064 (1,104) Investment income mn rmb Impairment losses mn rmb 0 0 (2,412) 0 0 0 (8,587) 0 0 0 Pre Tax Profit mn rmb 24,765 11,703 5,117 19,041 12,076 12,061 566 25,008 12,673 14,279 -11% Tax expense mn rmb (4,210) (2,349) (686) (3,746) (1,461) (1,804) (923) (4,592) (2,059) (2,780) -26% Non-controlling interest mn rmb (2,197) (1,323) (602) (1,320) (838) (1,944) 768 (2,677) (1,786) (1,384) 29% Net income mn rmb 18,358 8,031 3,829 13,975 9,777 8,313 411 17,739 8,828 10,114 -13% Reported EPS rmb/sh % Dividend (tax inclusive) rmb/sh % Payout ratio (half year) % 47% 143% 45% 156% 48% 45%

Source: Company data, Goldman Sachs Global Investment Research

Exhibit 2: Summary of Sinopec’s segment performance vs. GSe Sinopec Operational Data Jun-24 Sep-24 Dec-24 Mar-25 Jun-25 Sep-25 Dec-25 Mar-26 Jun-26 Jun-26…