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Region: China
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Fundamental View
AS OF 05 Jun 2025We expect the credit profile of Sinopec, which is one of the three Chinese national oil companies (NOCs) to continue to be underpinned by its strategic role in China’s energy security and the resulting strong government support.
We expect Sinopec’s standalone credit profile to remain supported in FY24 by resilient refined oil demand and improving demand for chemical products as industrial activities pick up and the destocking trend ends.
To note, we use the financials of HKEx listed Sinopec Corp (386.HK) as a proxy for the credit profile of its parent, the obligor of the outstanding $ bonds (BBG: SINOPE).
Business Description
AS OF 05 Jun 2025- Sinopec Group is a Chinese integrated oil and gas (O&G) company and is one of the largest globally & domestically. In 3Q24, 56.4% of Sinopec Corp' external revenues came from marketing and distribution (i.e. retail and direct sales of refined oil), 13.9% from chemicals, 5.1% from refining, and 5.0% from E&P. Corporate and others segment accounted for the remaining 19.6% of sales revenue, consisting of import and export business, R&D and managerial activities.
- The refining segment purchases crude oil from third parties as well as the E&P segment of the company, and processes crude oil into refined petroleum product. Most of the gasoline, diesel and kerosene are sold internally to the marketing and distribution segment of the company; part of the chemical feedstock is sold internally to the chemical segment, and the other refined petroleum products are sold externally to both domestic and overseas customers. The marketing and distribution segment purchases refined oil products from the refining segment and third parties, and mainly distributes to domestic customers via its wholesale and retail networks.
- In 9M24, Sinopec's total oil and gas output was 386.06 mn barrels of oil equivalent, up 2.6% YoY; this included 190.42/20.87 mmbbls (+1.2%/-6.6%) of domestically produced/overseas crude oil, as well as 1,084 bcf of natural gas (+5.6% YoY). The average realized price of its crude oil and natural gas was $76.6/bbl (+1.1% YoY)and $7.48/thousand cubit feet (+5.4% YoY)respectively.
Risk & Catalysts
AS OF 05 Jun 2025Risks: Lower-than-expected domestic sales of refined oil and chemical products due to a severe economic downturn, higher-than-expected crude oil and gas feedstock costs resulted from geopolitical tensions, elevated inventory losses due to tumbling oil & gas prices, and large capex overrun result in a weaker standalone credit profile. However, we expect the strong government support to offset these downside risks. US sanction related headline risks due to US-China tension and other geopolitical risks.
Catalysts: inflow into China $ bonds as a result of improving China macro outlook and US-China relationship; stronger-than-expected recovery in chemical product demand.
Key Metric
AS OF 05 Jun 2025| RMB bn | FY20 | FY21 | FY22 | FY23 | 3Q24 |
|---|---|---|---|---|---|
| Total Debt/Capitalization | 25.3% | 25.6% | 27.5% | 31.5% | 33.1% |
| Net Debt/Capitalization | 9.4% | 7.6% | 16.3% | 19.8% | 21.4% |
| Total Debt/Total Equity | 33.8% | 34.5% | 38.0% | 46.1% | 49.4% |
| Total Debt/Total Assets | 17.2% | 16.7% | 18.3% | 21.7% | 22.9% |
| Total Debt/EBITDA | 1.5x | 1.2x | 1.5x | 2.0x | 2.3x |
| Net Debt/EBITDA | 0.6x | 0.4x | 0.9x | 1.3x | 1.5x |
| EBITDA/Gross Interest | 16.8x | 20.1x | 16.1x | 14.5x | 14.2x |
| EBITDA Margin | 9.5% | 9.4% | 7.0% | 6.8% | 5.9% |
CreditSight View Comment
AS OF 05 Jun 2025We affirm our Market perform recommendation on Sinopec. A-rated Chinese state-owned enterprises (SOEs), including Sinopec are trading tight due to a lack of new supply and as investors fly to quality amid macro uncertainties in China. We continue to prefer AA-rated Korean quasi-sovereign names for safe carry (like KOROIL, KORGAS, KEPCO) and higher-beta Chinese SOEs for spread pickup.
Recommendation Reviewed: June 05, 2025
Recommendation Changed: May 03, 2021
Who We Recommend
Woori Financial Group
Shinhan Financial Group
Reliance Industries
How may we help you?
Search topics about wealth insights and investments.China CITIC Financial Asset Management (Huarong)
- Sector: Financial Services
- Sub Sector: Banks
- Region: China
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Fundamental View
AS OF 08 Apr 2025A large impairment loss in FY20 brought CITIC AMC (formerly Huarong) to the brink of insolvency, but a state-led rescue plan provided it with liquidity support and brought its capital back above minimum requirements. CITIC has replaced the MoF as its largest shareholder. CITIC AMC remains as one of the Big 5 state-owned AMCs in China and will continue to perform national services.
On the guidance of the authorities, CITIC AMC has divested almost all of its non-core subsidiaries.
We expect its core operations to remain weak and volatile, until China’s economy is back on the upswing, residents regain confidence in the property market, and improved capital markets lead to better valuations on its securities books.
Business Description
AS OF 08 Apr 2025- China CITIC Financial Asset Management (formerly Huarong) is one of the five major state-owned asset management companies in China. It was first set up in 1999 to take over the bad debts of ICBC.
- The AMCs were originally due to be wound up after dealing with these "policy loans" that had come onto the books of the banks under government direction before their commercialisation, but the AMCs found a new role as commercial bad debt managers.
- CITIC AMC was commercialised in 2012 and completed its IPO on the HK stock exchange in 2015. Since then, it expanded its financial services to banking, financial leasing, securities & futures, trust, as well as consumer finance. However, after heavy losses in FY20, the company has divested almost all of its non-core business as directed by the authorities.
- Following the CITIC-led rescue plan and the equity transfer from the Ministry of Finance (MOF) to CITIC, CITIC has become its largest shareholder (26.46%). Other significant shareholders include MOF (24.76%), Zhongbaorongxin (18.08%), Cinda AMC (4.89%), China Life Insurance (4.50%), National Social Security Fund (3.08%), Warburg Pincus (2.57%), and ICBC Financial AM (2.44%). It was renamed to share the "CITIC" brand in Nov-23.
Risk & Catalysts
AS OF 08 Apr 2025CITIC’s support is strong (name change, investment in CEB and CITIC Ltd, subsidiary disposal, new management team, etc.) and more meaningful to the company compared to direct ownership by the government.
Derisking continues with lower property exposure, non-core businesses have largely been disposed of and the company is able to focus on its main DDA business per the guidance of the authorities.
While the company was able to deliver profit growth on the back of CITIC support and its associate interest holdings, core performance remains weak, and there could be continued volatility in the name.
AMCs may find it harder to dispose DDAs at good valuations amid a deceleration economic cycle. Longer holding periods and lower fair values of acquired DDAs could dampen return yields and increase the NPL ratio of restructuring-type DDAs.
Key Metric
AS OF 08 Apr 2025| CNY mn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| ROA | (6.40%) | 0.10% | (2.20%) | 0.02% | 0.75% |
| ROE | (147.6%) | 1.0% | (49.8%) | 3.6% | 18.4% |
| Total Capital Ratio | 4.2% | 13.0% | 15.1% | 15.1% | 15.7% |
| Leverage Ratio | 1,330.0x | 14.2x | 16.1x | 11.5x | 10.1x |
| Equity/Assets | 1.1% | 3.8% | 5.2% | 5.0% | 5.7% |
CreditSight View Comment
AS OF 14 Jul 2025CITIC AMC continued to post profits in FY24, largely helped by investments in CEB, BOC and CITIC Ltd. Core businesses remained weak and volatile, as the company continues to lower valuations on existing DDAs acquired many years ago. Its non-DDA financial assets also have a more volatile performance than peers. CITIC’s support is strong, derisking continues with a meaningful improvement in the provision coverage ratio, non-core businesses have all been cleared, and the company is able to focus on main DDA business per the authorities’ guidance. However, we expect to continue to see high earnings volatility and poor disclosure. We expect it to trade 30-40 bp wider than CCAMCL.
Recommendation Reviewed: July 14, 2025
Recommendation Changed: July 14, 2025
Who We Recommend
Woori Financial Group
Shinhan Financial Group
Reliance Industries