In "The Big Banks," Citigroup: The escalation of the situation in the Middle East, pay attention to the development of Sinopec's downstream business

Citi published a research report indicating that Sinopec (00386.HK) saw its net profit drop 34% year-on-year to RMB 32.5 billion last year, which was 12% and 19% lower than the bank's and market expectations, respectively. In the fourth quarter of last year alone, net profit reached RMB 400 million, down 89% compared to the same period in the 2024 fiscal year, primarily impacted by a RMB 7.35 billion inventory loss due to falling oil prices at the end of last year. The company declared a dividend of RMB 0.2 per share last year, a 30% year-on-year decrease, resulting in a payout ratio of 75%, with a current yield of 5% based on the current stock price.

The bank believes that the current focus on Sinopec is how the escalating situation in the Middle East will affect its downstream business, and if supply disruptions worsen further in the second quarter of 2026, Sinopec will have to bear a larger national service burden. The bank maintains its target price for H shares at HKD 5.2, with a rating of "outperform."