[ET Net News Agency, 8 October 2018] Goldman Sachs lowered its target price for Sinopec
(00386) by 1% to HK$8.05 from HK$, and maintained its "neutral" rating.
The research house believes US$60-80/bbl Brent oil prices are the "sweet spot" for
Sinopec, because in this range its high-break-even upstream assets are profitable, and it
enjoys full pass-through of global crude oil prices to consumers under the current NDRC
refined product pricing mechanism (and therefore, an attractive refiner margin).
Over the last two weeks, Brent oil prices have traded above US$80/bbl, driven by tighter
physical oil market balances. Goldman believes the risks of a margin squeeze in China
downstream is escalating through 4Q.
Goldman cut its 2018/19E EPS forecasts by 1.1%/1.4% on lower 4Q 2018 refiner margins and
lower 2019 refinery utilization. (KL)