China Petroleum and Chemical Corporation (Sinopec) announced a y-o-y increase in crude oil production and refinery throughput for 1H 09. Going forward, we expect the company to benefit from the Chinese government's policy to support downstream companies by more rapidly moving retail gasoline and diesel prices in tandem with the movement in international crude oil price. However, we believe that the positives are factored in to the stock price and therefore maintain our HOLD rating over our 6-12 month investment horizon until we will reassess the rating after the company releases its full 1H 09 results. In line with our fundamental outlook, we maintain the ADR a HOLD. The Hong Kong dollar is currently pegged to the US dollar. We will reassess our rating for the ADR (1 ADR = 100 common shares) after the company releases its 1H 09 results.

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China Petroleum and Chemical Corporation (Sinopec) is acquiring Canada based Addax Petroleum Corporation (Addax), which will increase its current reserve base by around 5%. The company is strategically adding to its oil reserve base in order to fulfill China's ever growing oil requirements. The deal's benefits will be realized over a longer term horizon. Based on our fundamental outlook, we maintain our HOLD rating for Sinopec's common stock at current price levels. We will reassess our common stock rating for Sinopec after the company announces its 1H 09 results.

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China Petroleum and Chemical Corporation (Sinopec) reported a robust increase in its 1Q 09 net profit backed up by higher gasoline and diesel selling prices and lower input costs. Going forward, we expect the company’s sales volumes to remain flat in FY 2009, depressing its top-line during the year. However, lower average oil prices will benefit the company’s bottom-line over our 6-12 investment horizon. Therefore, we maintain our common stock rating a HOLD for Sinopec until we can reassess the company in our next update report, after the company releases its 1H 09 results in September 2009. In line with our fundamental outlook, we reiterate the ADR a HOLD. The Hong Kong dollar is currently pegged to the US dollar. We will reassess our rating and target price for the ADR (1 ADR = 100 common shares) after the company releases its 1H 09 results in September 2009.

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Disclaimer Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (’Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results. Copyright © 2009 Independent International Investment Research PLC. All rights reserved.

In accordance with the Energy Information Administration‘s (EIA) short-term energy outlook report, dated March 2009, Chinese oil consumption is expected to increase to 8.17 mn barrels per day (mmbpd) in FY 2009, compared to 7.98 mmbpd in FY 2008, while total world oil consumption is expected to decline from 85.65 mmbpd consumed in FY 2008 to 84.27 mmbpd in FY 2009. Hence, even in the current recessionary environment, we expect the demand for the company’s refined oil products to remain stable. On 24 March 2009, the Chinese government announced a hike in the market prices of gasoline and diesel. We believe that the Chinese government is moving prices swiftly to compensate for the change in international crude prices, enabling downstream companies to pass on incremental crude oil purchase costs to end consumers. International crude prices have been moving upwards after they bottomed out at US$31.41 on 22 December 2008. We expect crude oil prices will move up further from current levels, however we believe that, on average, the price of crude oil will be lower in FY 2009 compared to FY 2008, impacting the company’s top-line as the company’s average sale prices will decline accordingly.

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Disclaimer Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (’Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results. Copyright © 2009 Independent International Investment Research PLC. All rights reserved.

China Petroleum and Chemical Corporation (Sinopec) reported strong growth in FY 2008 revenues, supported by increase in revenues across all major business segments. However, higher crude oil purchase costs impacted bottom-line performance. Going forward, we expect the company to benefit from the recent increase in gasoline and diesel prices in China. Furthermore, lower average crude prices are likely to improve bottom-line performance in FY 2009 by lowering purchase costs. Therefore, based on our fundamental outlook, we maintain our BUY rating for the common stock. We will reassess our target price and rating in our FY 2008 update report. Given current price levels and our fundamental outlook, we maintain our BUY rating for ADR (1 ADR = 100 common shares). The Hong Kong dollar is currently pegged to the US dollar. We will reassess our target price and rating in our FY 2008 update report.

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Disclaimer Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (’Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results. Copyright © 2009 Independent International Investment Research PLC. All rights reserved.

China Petroleum and Chemical Corporation (Sinopec) issued a profit warning in respect to its FY 2008 net profit on 23 January 2009. The company warned that it expects its profit to decline by more than 50% y-o-y as its margins were impacted by higher oil prices during 1H 08 and a drop in sales and realized selling prices in 2H 08. However, as we have already accounted for this in our FY 2008 estimates and as its margins are expected to improve with a decline in international crude oil prices, going forward, we maintain our BUY rating for Sinopec’s common stock on fundamental grounds until we will reassess the same after the company releases its FY 2008 results. In line with our fundamental outlook, we maintain the ADR a BUY. The Hong Kong dollar is currently pegged to the US dollar. We will reassess our rating for the ADR after the company releases its FY 2008 results.

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Disclaimer Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (’Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results. Copyright © 2008 Independent International Investment Research PLC. All rights reserved.

China Petroleum and Chemical Corporation (Sinopec) reported its FY 2008 operational results on 22 January 2009. The company announced a moderate y-o-y increase in both domestic sales volumes of refined oil products and its hydrocarbon production during FY 2008. Although the company’s average realized selling price has declined with a drop in international crude oil prices, we are optimistic about the company’s future performance as low crude oil prices will lower the company’s purchase costs and improve its operating margin over our investment horizon. As a result, we maintain our BUY rating for Sinopec’s common stock on fundamental grounds until we will reassess the same after the company releases its FY 2008 results. In line with our fundamental outlook, we maintain the ADR a BUY. The Hong Kong dollar is currently pegged to the US dollar. We will reassess our rating for the ADR after the company releases its FY 2008 results.

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Disclaimer Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (’Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results. Copyright © 2008 Independent International Investment Research PLC. All rights reserved.

Sinopec reported a y-o-y decline in net income in 3Q 08 given Chinese domestic price controls. Going forward, we expect that with the recent downturn in crude oil prices, the company will report a significant improvement in its overall margins. Moreover, the common stock price has declined significantly since our update report dated 23 September 2008 reflecting weakness in global equity indices, which we believe has left the company significantly undervalued. Therefore, we upgrade our common stock rating for Sinopec from a HOLD to a BUY on fundamental grounds. In line with our fundamental outlook, we upgrade the ADR rating from a HOLD to a BUY. The Hong Kong dollar is currently pegged to the US dollar.

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Disclaimer Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (’Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results. Copyright © 2008 Independent International Investment Research PLC. All rights reserved.

China Petroleum and Chemical Corporation’s (Sinopec) stock price has declined significantly since our last update report, reflecting the impact of a widespread sell-off in equity markets and investor concerns regarding a possible slowdown in demand for hydrocarbons. As the common stock has achieved our target price, we believe the common stock is fairly valued at current price levels and hence upgrade our common stock rating from a SELL to a HOLD. Given our fundamental outlook, we upgrade the ADR from a SELL to HOLD. The Hong Kong dollar is currently pegged to the US dollar; therefore, we do not anticipate a significant currency impact on the ADR.

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Disclaimer
Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (’Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results.
Copyright © 2008 Independent International Investment Research PLC. All rights reserved.

China Petroleum and Chemical Corporation (Sinopec) reported a strong y-o-y rise in its 1H 08 revenues reflecting strong performances across all of its business segments. However, the company’s bottomline performance was severely impacted as a rise in its top-line was more than offset by a rise in purchase costs within its downstream segments. Going forward, we are cautious of the company’s long term profitability given that the company’s top-line growth is unlikely to offset its rising purchase costs. Furthermore, given the company’s increased debt levels, rising interest expenses will continue to impact the company’s bottom-line. Therefore, based on our fundamental outlook, we foresee significant downside in the common stock and downgrade the common stock from a HOLD to a SELL.

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Sinopec is expected to announce a formal bid to acquire Russian focused oil exploration and production company, Imperial Energy Corporation PLC (Imperial Energy). The deal, if materializes, would significantly boost Sinopec’s upstream business in Russia. However, as there remains significant uncertainty regarding the completion of the deal, we maintain our current HOLD rating until we fully reassess the company following its 1H 08 results. In line with our fundamental rating, we maintain our current HOLD rating for Sinopec’s ADR. The Hong Kong dollar is currently pegged to the US dollar.

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China Petroleum and Chemical Corporation (Sinopec) issued a profit warning in respect to its 1H 08 net profits. The company expects its profit to decline by more than 50% given discrepancy between rising international crude oil prices and Chinese governmental controls over prices for refined oil products sales. Although we are likely to revise our estimates, we maintain our current HOLD rating until we fully reassess the company following its 1H 08 results. In line with our fundamental rating, we maintain our current HOLD rating for Sinopec’s ADR. The Hong Kong dollar is currently pegged to the US dollar.

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China Petroleum and Chemical Corporation (Sinopec) reported strong operating performance in FY 2007, led by increased sales volumes and higher domestic price realizations. Going forward, our anticipated increase in hydrocarbon prices is likely to support top-line growth. Moreover, we remain optimistic regarding the company’s Exploration & Production (E&P) activities and expansion plans to increase refining and petrochemical capacity. In addition, the Chinese government has provided several tax benefits and subsidies which are likely to benefit bottom-line. However, the domestic refined product prices, controlled by the Chinese government, are significantly lower than those that would be dictated when considering the price of crude oil, the company’s major input, on the international market. As a result, oil companies are incurring substantial losses in refining units. The Chinese government is reluctant to increase domestic refined product prices due to soaring inflation. Therefore, although our anticipated increase in crude oil prices may significantly increase Sinopec’s Cost of Goods Sold (COGS), the company may not be able to pass on increasing input costs to consumers, negatively impacting margins. Furthermore, an anticipated increase in crude oil prices is likely to lead to sector specific inflation, putting further pressure on margins. Therefore we hold a neutral view on Sinopec’s common stock over our investment horizon.

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