[ET Net News Agency, 24 January 2020] J.P. Morgan said Sinopec Shanghai Petrochemical's
(00338) profit warning highlights the challenging refining environment, especially in
China.
The company guided FY2019 earnings within the range of Rmb2.0bn-2.4bn, down 57-63%,
although broadly in line with consensus at Rmb2.2bn. The research house said SPC's high
exposure to Middle East crude continues to put downward pressure on its refining
profitability as well as domestic refining oversupply.
With global VLCC (very large crude carriers) day-rates remaining elevated and some of
its chemical products well below cash costs, JPM sees further downside risks to earnings
and reiterated its "underweight" rating and HK$1.91 target price.
But it sees this result as having limited impacts on Sinopec (00386) due to the
differences in refining assets. (KL)