Huatai Securities: Upgraded China Petroleum AH shares to "buy" rating, sulfur supply and demand contradictions lead to the heating up of the refining sector.

The research report of Huatai Securities pointed out that due to the peak of China's crude oil processing volume and the suppression of overseas supply, global sulfur supply growth has encountered a bottleneck. On the demand side, whether it is the expansion of global phosphorus compound fertilizer consumption or the increase in production capacity in China's lithium batteries, nylon, titanium dioxide, and other new materials fields, all contribute to steady growth. In 2024, China's apparent sulfur consumption is expected to increase by 8.6% year-on-year, with imports accounting for 47% and a year-on-year increase of 12.7%. The increase in China's dependence on imported sulfur and global supply-demand contradictions has led to a cumulative increase in sulfur prices by 152% to 3930 yuan/ton by 2025. Sinopec, relying on its refining and natural gas processing capabilities, has an annual sulfur production capacity of 8.88 million tons, making it the largest sulfur supplier in China. The rebound in the sulfur market has driven the company's refining sector to warm up, combined with the turning point in the production capacity cycle in the petrochemical field. The bank has raised the company's A/H rating to "buy" and set a target price of 7.60 yuan/6.26 Hong Kong dollars.