While most chemical fiber companies struggle with overcapacity and thin margins, Hengyi Petrochemical has delivered a stunning performance: net profit attributable to shareholders for H1 2026 is expected to reach RMB 5.5 to 6 billion, a year-on-year increase of over 23 times. This figure not only far exceeds market expectations but also forces a reassessment of the resilience of integrated refining-chemical enterprises during cyclical downturns.
The Core Engine of Profit Surge
Hengyi's profit explosion is no accident. Its core asset—the Brunei refining project—has become the company's 'ballast stone' amid persistently tight supply-demand dynamics for refined oil products in Southeast Asia. According to public industry data, Q1 net profit reached RMB 1.995 billion, up 3,773.77% year-on-year; Q2 net profit further climbed to between RMB 3.5 and 4 billion, a quarter-on-quarter increase of 76% to 101%. This accelerating pace highlights the elasticity of the Brunei refinery's profitability as refining spreads widen.
Unlike domestic refining companies, Hengyi is the only Chinese chemical fiber leader with an overseas refinery. The Brunei facility benefits from local tax incentives, market-based pricing, and low freight and insurance costs, achieving full production and full sales. This locational advantage translates into a sustained profit premium against the backdrop of a long-term tight supply of refined oil in Southeast Asia. Meanwhile, high prices for chemical products like PX and benzene further consolidate the refining segment's contribution.
Industrial Chain Synergy and Capacity Optimization
The profit surge is not solely due to the refining breakthrough. The release of nylon chain capacity and the recovery of the polyester market provide dual support. The PTA and polyester industries have been advancing 'anti-involution' capacity optimization, improving supply-demand dynamics and enabling profit recovery. Hengyi's nylon project is in its ramp-up phase, gradually converting new capacity into actual returns.
From an industry perspective, this vertical integration of 'refining + polyester + nylon' gives Hengyi stronger pricing power and cost control on the raw material side. Especially when the domestic polyester industry still faces new capacity pressure, Hengyi's access to low-cost raw materials through its overseas refinery, which then feeds its downstream chemical fiber business, creates a competitive moat that is difficult to replicate.
Three Strategic Projects: From Refining Leader to New Materials Platform
Hengyi's long-term growth logic extends beyond existing capacity. The company is advancing three strategic projects that will fundamentally reshape its business structure. The Brunei Phase II project, with a design capacity of 12 million tons per year, is scheduled for completion by end-2028, bringing total Brunei refinery capacity to 20 million tons per year. This is the only overseas capacity increment among private mega-refining projects in recent years, highlighting its scarcity.
The Xinjiang coal-to-ethylene glycol project plans an annual output of 2.4 million tons of high-quality fiber-grade EG, expected to start production in H1 2028. This project not only diversifies raw material sources but also reduces EG import dependence by leveraging China's abundant coal resources. The Hubei Jingzhou circular new materials project uses waste textiles as feedstock to produce recycled new materials, aligning with the national 'dual carbon' strategy.
Once operational, these three projects will create a 'oil, coal, and cloth' three-pronged raw material structure, greatly enhancing the stability of the entire industrial chain's profitability. For downstream buyers, this means Hengyi will offer greater supply resilience and pricing flexibility for chemical fiber raw materials in the future.
Can the Boom Last? Risks and Judgment
The key market question is: can the 23-fold growth be sustained? In the short term, the tight supply-demand for refined oil in Southeast Asia is unlikely to reverse within a year, and Brunei's high profitability is likely to persist for the full year. Capacity optimization in the PTA and polyester industries has achieved substantial progress, making profit recovery sustainable. Coupled with the nylon project ramp-up, the 2026 full-year profit center will be significantly higher than in previous years.
However, risks cannot be ignored. A sharp drop in international crude oil prices would directly impact refining profits and create inventory impairment pressure. Projects like Brunei Phase II involve large investments and long construction periods, posing risks of delays or capital strain. Furthermore, concentrating core capacity in a single region like Brunei exposes the company to changes in host country policies or geopolitical conditions that could affect raw material supply stability. Weak downstream textile demand would also drag on polyester segment profit recovery.