When textile upstream chemical fiber companies are still anxious about PTA overcapacity, Hengyi Petrochemical dropped a bombshell with a half-year report showing a 23-fold net profit surge. In H1 2026, the company forecast net profit attributable to shareholders of RMB 5.5-6 billion, a year-on-year increase of 2,326% to 2,546%. This figure nearly equals the total profit of the company over the past three full fiscal years.
Growth Engines: Brunei Refinery and Industry Recovery
Hengyi's profit explosion was no accident. In Q1 2026, net profit reached RMB 1.995 billion, up 3,773% YoY, setting a high base. In Q2, quarterly profit jumped to RMB 3.5-4 billion, a sequential increase of 76% to 101%, indicating accelerating growth.
The core driver is its Brunei refining project. As the only domestic chemical fiber leader with an overseas refinery, Hengyi capitalizes on the long-term supply shortage in Southeast Asian refined oil markets. Unlike domestic refineries burdened by overcapacity and thin margins, the Brunei plant enjoys local tax incentives, market-based pricing, and low freight costs. It achieved full production and full sales in H1, maintaining high per-ton product margins. Meanwhile, after years of 'anti-involution' in domestic PTA and polyester sectors, supply-demand dynamics have materially improved, enabling profit recovery. Capacity releases in the nylon chain also contributed additional growth.
Three Strategic Projects: From Chemical Fiber Leader to Oil-Coal-Fabric Integration
What truly excites the capital market is not just current profits but Hengyi's expanding strategic blueprint. The company has three major projects underway, aiming to break free from single crude oil dependence and build a new 'oil, coal, and fabric' industrial pattern.
- Brunei Phase II: Capacity optimized to 12 million tons/year, producing diesel, PX, benzene and other high-value products, targeting completion by end-2028. The combined capacity of the Brunei refinery will then reach 20 million tons/year, making it the only incremental overseas capacity from private mega-refineries in recent years.
- Xinjiang Coal-to-Ethylene Glycol Project: Plans to produce 2.4 million tons/year of high-quality fiber-grade coal-to-ethylene glycol, expected to start production in H1 2028. This will open a new 'coal-ethylene glycol-polyester' raw material route.
- Hubei Jingzhou Circular New Materials Project: A 300,000 tons/year circular new materials industrial demonstration project using waste textiles as feedstock instead of crude oil, with an 18-month construction period. This directly aligns with China's 'dual carbon' strategy and waste textile recycling policies, forming a unique multi-feedstock system post-completion.
The common logic: beyond traditional refining profits, Hengyi is opening two new tracks—coal chemicals and circular recycling—to smooth cyclical risks from single raw material price volatility. For buyers and downstream factories, this means Hengyi may offer more diversified raw material supply options in the future, potentially forming pricing advantages in ethylene glycol and recycled fibers.
Sustainability of High Margins: Risks and Opportunities
The market's key question: is this profit surge a temporary cyclical spike or a sustainable upward shift in profit baselines? Industry logic suggests the tight supply-demand balance in Southeast Asian refined oil products is unlikely to reverse quickly, supporting high margins at the Brunei refinery for the rest of the year. The PTA and polyester sectors have seen substantial capacity optimization, making profit recovery sustainable. Combined with ongoing nylon capacity ramp-up, the full-year profit baseline is expected to permanently shift upward compared to previous years.
However, risks are not negligible.
- A sharp drop in international crude oil prices would directly cause inventory write-downs, and narrowing crack spreads would erode refining profits.
- The Brunei Phase II and coal-to-ethylene glycol projects involve large investments and long construction periods, posing risks of delays and funding pressure.
- Concentrating core refining capacity in a single region (Brunei) exposes the company to host country policy or geopolitical changes that could impact cost advantages and raw material supply stability.
- Weaker-than-expected downstream textile demand would slow polyester segment profit recovery.
For textile industry practitioners, Hengyi's case offers an important reference: amid overcapacity and raw material price volatility, extending upstream to refining and diversifying raw material routes is becoming a key path for leading companies to break through.