The Zhitong Finance App learned that Xiaomo released a research report saying that the Shanghai Petrochemical (00338) rating was upgraded from “reduced holdings” to “neutral”, and that the target price was raised from HK$0.86 to HK$1.4. There is a 24%-27% downside risk in the company's profit this year and next two years compared to market forecasts, but I believe it is now reflected in the valuation.

The bank pointed out that the reasons for raising the company's rating include predicting that the gross margin of China's refining industry is expected to return to a normal level this year, causing the bank to measure Sinopec's earnings this year or increase 100% from the original estimate, the strong outlook for oil and gas demand after the pandemic, and the reduction in official sales prices (OSP) from the Middle East to Asia to support refining industry gross margins in the next few quarters.

According to the report, the company announced earlier that the company announced that last year's net loss is expected to reach 2,605-3.184 billion yuan, which means the net loss for the last quarter of last year was 604-1,183 million yuan. Shanghai Petrochemical explained that its weak performance was mainly affected by non-operating activities. The bank expects that its net loss will have limited downside risks in the next few quarters, and that stock prices will stabilize.