Baofeng Energy Sees Explosive First-Half Performance; Net Profit Expected to Reach Up to 10.2 Billion Yuan

On July 13, Baofeng Energy released an announcement forecasting an increase in its semi-annual performance for 2026. The company expects to achieve a net profit attributable to shareholders of 9.3-10.2 billion RMB in the first half, a year-on-year increase of 62.65%—78.40%; and a net profit after deducting non-recurring gains and losses of 8.7-9.6 billion RMB, a year-on-year increase of 55.93%—72.06%, realizing a significant leap in overall profitability.

I. Dual-wheel drive of volume and price, with the profit scissors gap continuing to widen

This round of high performance growth relies mainly on the dual resonance of capacity release + rising prices.

In terms of capacity, the company's Inner Mongolia 3 million tons/year coal-to-olefins project reached full production in April 2025, driving total olefin capacity to 5.2 million tons/year, firmly ranking first in domestic coal-to-olefins. The first half of 2026 is the first full contribution cycle after the project reached production, with production and sales increasing significantly year-on-year. Based on the first quarter's net profit of 3.661 billion RMB, the company's single-quarter net profit for the second quarter can reach 5.639—6.539 billion RMB, a significant sequential improvement, with new capacity dividends continuing to materialize.

In terms of prices, affected by the geopolitical situation in the Middle East, international crude oil and alkane prices rose sharply, driving the domestic price center of polyolefin products such as PP and PE to continue moving upward. As of mid-June, domestic PP drawing wire prices rose by about 46% compared to the beginning of the year, and HDPE film prices rose by 19% compared to before the conflict.

Compared to the significant cost increase of oil-based enterprises, coal-to-olefins rely on the long-term coal agreement mechanism, making cost fluctuations controllable and forming a obvious profit scissors gap. Data shows that in the first half of 2026, coal-to-polyethylene profits surged by 274.06% year-on-year, while oil-to-polyethylene profits fell by 63.85% year-on-year, fully highlighting the cost advantage of the coal route.

II. Industry pattern reshaping, domestic capacity expansion, overseas capacity contraction

The domestic polyolefin industry continues to be in a capacity expansion cycle. In 2025, domestic total polyolefin capacity reached 88.095 million tons/year, a year-on-year increase of 12.9%, and total output increased by 15.9% year-on-year. The rapid release of capacity accelerated import substitution, and the overall import dependence of polyolefins dropped to 14.8%, with polypropylene import dependence only 0.7%, basically achieving self-sufficiency.

Industry supply pressure continues, with hundreds of millions of tons of new PE and PP capacity planned to land in 2026. On July 9, the Tarim Phase II 450,000 tons/year PP unit was officially put into production, and the pace of new capacity launch accelerated during the year, overall presenting a pattern where **supply growth rate is higher than demand growth rate**.

The global chemical pattern is simultaneously reconstructing. With high energy costs in Europe and sluggish downstream demand, Dow Chemical plans to shut down multiple ethylene, propylene, and caustic soda units in Germany and the UK in stages before 2029; Japan's Sumitomo Chemical plans to raise low-density polyethylene prices, and overseas chemical companies' profitability pressure continues to increase.

Domestically, the acceleration of "reducing oil and increasing chemicals" and the transformation to high-end new materials continues. Relying on raw material autonomy and stable cost advantages, the strategic value of the coal chemical industry continues to rise.

III. Company has sufficient capacity reserves, long-term growth logic is clear

Despite being in a cyclical market, Baofeng Energy's medium-to-long-term expansion path is clear. The Ningdong Phase IV 500,000 tons coal-to-olefins project is expected to be put into production at the end of 2026, and the Xinjiang Zhundong 4 million tons project has been submitted to the NDRC for approval. In the future, it will form a Ningdong, Inner Mongolia, Xinjiang three major production base layout, with scale advantages continuing to magnify.

At the same time, the company's profit quality is steadily improving. In 2025, operating cash flow was 16.851 billion RMB, and free cash flow turned positive to 10.2 billion RMB; in the first quarter of 2026, cash flow continued to be better than net profit, and the company officially shifted from the capital investment stage to the harvest stage of capacity release and abundant cash flow.

IV. Cyclical differences still exist, multiple risks need to be warned

Underneath the dazzling performance, the market has obvious differences regarding the sustainability of the cycle. The company's stock price fell from the March high of 36.49 RMB to 20.72 RMB, a maximum drop of over 43%, and market value evaporated by nearly 100 billion RMB, mainly due to worries about the regression of cycle dividends.

First, the spread dividend is phasic. In the second half, coal demand warms up and safety supervision tightens, coal prices may rise moderately, compressing production profits; if geopolitical conflicts ease and oil prices correct, the cost advantage of coal-to-olefins relative to oil-to-olefins will marginally weaken.

Second, industry supply pressure continues, with new capacity landing intensively, which may suppress product prices and the overall profitability of the industry.

Third, expansion brings financial pressure. As of the first quarter of 2026, the company's narrow-scope net debt was about 20.8 billion RMB. With continuous investment in subsequent major projects, the enterprise needs to continuously balance the pace of expansion and debt levels.

V. Industry Summary

Overall, relying on capacity scale and cost stability advantages, Baofeng Energy fully cashed in on the chemical cycle dividends in the first half of 2026. However, industry overcapacity pressure, cyclical fluctuations, and financial expansion pressure coexist, and subsequent performance growth rates may gradually return to rationality.