Everbright Securities released a research report stating that the restructuring between China Petrochemical Corporation (SINOPEC CORP) and China National Aviation Fuel Group will help SINOPEC CORP integrate the entire industrial chain of jet fuel production, sales, and refueling, thereby enhancing the competitiveness of its refined oil business. Subsidiary listed companies are expected to benefit from SINOPEC CORP's integrated, full-industry-chain advantages. The main viewpoints of Everbright Securities are as follows.

On January 8, 2026, upon approval by the State Council, China Petrochemical Corporation and China National Aviation Fuel Group Corporation implemented a strategic reorganization. China Petrochemical Group is a world-class refining and chemical giant, with businesses covering the entire oil and gas, and refining and chemical industry chain.

China Petrochemical Corporation is China's largest supplier of refined oil and petrochemical products, the world's largest refining company, the second largest chemical company, and ranks second globally in the total number of gas stations. The company primarily consists of four major business segments: oil & gas and new energy, refining and marketing, chemicals and new materials, and capital and finance. Its directly controlled listed companies include Sinopec Corp., Sinopec Engineering (Group) Co., Ltd., Sinopec Oilfield Service Corporation, and Sinopec Machinery. Sinopec Corp. alone has over 100 wholly-owned subsidiaries, controlled and affiliated companies, and branches, encompassing enterprises involved in oil and gas exploration and production, refining, chemicals, product sales, as well as research, foreign trade, and other units.

Since 2024, against a backdrop of pressured global economic recovery, rising geopolitical risks, volatile and declining international oil prices, and prominent market supply-demand contradictions, the company has overcome unfavorable production and operational conditions to achieve high-quality development across its businesses. In 2024, China Petrochemical Group reported operating revenue of 3,138.8 billion yuan, a year-on-year decrease of 3.3%, and net profit attributable to shareholders of 57.8 billion yuan, down 13.0% year-on-year. The group's stable oil and gas output, massive petroleum reserve system, and nationwide network collectively form the most reliable defense line for national energy security. China Petrochemical Group is actively embracing change, transforming from a traditional energy giant into a determined practitioner and leader in the green transition.

China National Aviation Fuel Group, established in 2002, is a central enterprise directly managed by the SASAC and is the largest aviation fuel enterprise in Asia, integrating aviation oil procurement, transportation, storage, testing, sales, and refueling services. Its main businesses primarily involve five sectors: aviation fuel, petroleum, logistics, international operations, and general aviation. It provides fuel supply guarantees for 258 domestic transport airports and 454 general aviation airports, serves 585 global airline customers, and offers wholesale, retail, storage, and distribution services for gasoline, diesel, and petrochemical products for civil aviation and social vehicles in 26 provinces, municipalities, and autonomous regions. The group has established large-scale logistics, storage, and transportation bases for refined oil and petrochemical products in regions such as the Bohai Bay Rim, Yangtze River Delta, and Southwest China.

Specifically, its businesses include: (1) Aviation Fuel Business: This is the core business, operated mainly by China National Aviation Fuel Co., Ltd., which provides refueling services for over 190 domestic and international airlines at more than 160 airports across China. (2) Oil and Chemical Trading Business: The main operating entity is China National Aviation Fuel Group Petroleum Co., Ltd. (CNAF Petroleum). According to its 2023 IPO prospectus, CNAF Petroleum's main businesses are refined oil sales, storage services, and city gas operations. In 2021, it sold 3.08 million tons of refined oil and 283 million cubic meters of natural gas, operating 332 gas stations. (3) Logistics Business: Operated by China National Aviation Fuel Group Logistics Co., Ltd., a major carrier in the domestic aviation fuel water transport market, dedicated to building a professional logistics management team and a highly integrated oil product distribution system. The company has business modules including shipping, terminals, storage, and pipeline transportation, with 7 branches and subsidiaries nationwide, operating 37 oil tankers and 45 shipping routes. (4) International Business: The main entity is China Aviation Oil (Singapore) Corporation Ltd., primarily engaged in jet fuel trading and related industrial investments, serving as the group's main channel for overseas jet fuel supply.

Following the restructuring, China Petrochemical Group will integrate the upstream and downstream industrial chain for jet fuel, expanding its sales and international business footprint. As China's largest refining and chemical enterprise, SINOPEC CORP is the largest upstream supplier of refined oil products domestically. In 2024, Sinopec Corp. produced 31.43 million tons of jet fuel and sold 27.86 million tons. Post-restructuring, SINOPEC CORP will gain access to downstream sales channels for aviation kerosene, forming a closed-loop industrial chain encompassing "crude oil imports, refining production, fuel transportation, and airport refueling." This integration is expected to reduce intermediate costs in jet fuel sales, strengthen its market influence in the jet fuel sector, and enhance SINOPEC CORP's overall competitiveness in the aviation fuel industry. For China National Aviation Fuel Group, securing SINOPEC CORP as a stable upstream supplier will improve its operational stability. Furthermore, SINOPEC CORP's refined oil sales and international trade businesses are expected to integrate horizontally with the corresponding departments of China National Aviation Fuel Group, further expanding the scale of production and operations and consolidating SINOPEC CORP's leading position in refining, sales, and trade.

The reform of state-owned enterprises is deepening, with restructuring and integration expected to enhance the competitiveness of central and state-owned enterprises. The year 2025 marks the conclusion of the action plan for deepening and enhancing SOE reforms. Optimizing the layout and structure of the state-owned economy is a key focus, characterized by accelerated restructuring, clear industrial orientation, and the aggregation of innovation momentum. The SASAC requires strengthening strategic and professional reorganization of SOEs, particularly enhancing integration capabilities in strategic emerging industries. The restructuring of China Petrochemical Group and China National Aviation Fuel Group aligns with the recent policy direction of SOE reform, which focuses on core responsibilities and businesses to enhance core competitiveness through integration. The aim is to optimize the layout of state-owned capital, consistent with the inherent requirement of making state-owned capital and enterprises stronger, better, and larger. As professional integration is solidly carried out, the allocation and operational efficiency of state-owned capital will be effectively improved, and the competitiveness of central SOE groups in the petrochemical and chemical industries is expected to continuously rise.

Investment recommendations suggest focusing on: (1) Sinopec Corp.: A world-leading enterprise with a full petrochemical industry chain, accelerating its chemical business transformation to create new growth drivers. (2) Sinopec Engineering: Platform advantages combined with overseas opportunities build the future, with strong capabilities forming core competitiveness. (3) Sinopec Oilfield Service: Riding the wave of high demand for oilfield services, deepening reforms to focus on cost reduction and efficiency gains. (4) Shanghai Petrochemical: A state-owned high-quality refinery with significant competitive advantages, accelerating the development of new materials business to create new growth points. (5) Sinopec Machinery: A high-quality supplier of oil and gas exploration equipment, with promising development in hydrogen energy business. (6) Sinopec Kantons Holdings: Actively exploring business transformation to become a leader in international petrochemical storage and logistics. (7) Taishan Petroleum: A refined oil marketing enterprise under China Petrochemical Group, continuously building platform-based services.

Risk warnings include potential delays in the restructuring integration process, significant fluctuations in refined oil demand, and risks in overseas markets.