[ET Net News Agency, 23 November 2020] Goldman Sachs initiated coverage on Sinopec
(00386) with a "sell" rating and a target price of HK$3.
The research house said Sinopec is a China downstream-focused integrated oil company,
with dominant market share in domestic refining, chemical and oil product retail sales.
Sinopec's shares are positively correlated with oil, with its earnings benefiting from
increasing upstream income and inventory gains from the refining segment when oil prices
go higher.
However, Sinopec has tended to underperform pure-play upstream names (e.g. CNOOC) in
tight-supply-driven oil rallies, i.e. when crude oil time spread strengthens. This is
because increasing crude oil time spreads translate directly into higher oil cost for
refiners, due to the physical crude pricing mechanism. Given the expected oil deficit in
2021, Goldman sees a difficult crude sourcing environment for refiners ahead. (KL)
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00386 SINOPEC CORP
Nominal 
4.650 +0.070 (+1.528%) Research Report
23/11/2020 14:04
{I-bank focus}Goldman rates Sinopec (00386) at "sell" & HK$3
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