Sinopec stock rating cut to Neutral by JPMorgan

On Tuesday, JPMorgan analysts downgraded China Petroleum (OTC:SNPTY) & Chemical Corporation (386:HK) (NYSE: SNP), commonly known as Sinopec (OTC:SHIIY), from Overweight to Neutral and adjusted the price target to HK$4.00 from HK$4.80. The revision follows Sinopec’s recent analyst briefing, which highlighted the company’s commitment to green initiatives and shareholder returns through dividends and buybacks.

The analysts acknowledged Sinopec’s efforts to counteract the structural decline in Chinese oil demand with environmentally friendly projects. Despite current challenges, InvestingPro analysis reveals positive expectations, with net income and sales growth forecast for this year. The downgrade of Sinopec’s A-shares had already occurred in January due to anticipated weak fourth-quarter and first-half 2025 earnings, but the H-shares maintained an Overweight rating due to the expected dividend.

Year-to-date, Sinopec-A’s share price has seen a decline of 14%, while Sinopec-H shares have dropped by 7%. Despite these declines, SNP has shown strong momentum with a 35.46% price return over the past six months and is currently trading near its 52-week high of $71.97. The premium of A-shares over H-shares has narrowed from 60% to 47%, which JPMorgan considers to be fair and in line with historical averages. Following the company’s earnings results, JPMorgan has also reduced its earnings per share (EPS) estimates for 2025 and 2026 by 2% and 23%, respectively, which are 20% and 36% below the consensus estimates.

In the broader context of China’s energy sector, JPMorgan analysts favor PetroChina for its potential to benefit from multi-year improvements in gas margins. This preference is set against the backdrop of Sinopec’s strategic shift toward sustainability and the challenges it faces in the short to medium term. For deeper insights into Sinopec’s financial health and additional ProTips, investors can access comprehensive analysis through InvestingPro.

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