The Zhitong Finance App learned that CMB International released a research report stating that it reiterated the “buy” rating of Sany International (00631), and the profit forecast remained unchanged, mainly because the acquisition transaction was subject to shareholders' approval, and the target price was HK$13. The company issued an announcement after the market closed yesterday (April 12) and plans to acquire Sany Petroleum Intelligent Equipment Company from the controlling shareholder. This marks its expansion into the field of oil and gas field fracturing equipment.

Given the tight global oil supply and countries' concerns about energy security, global oil and gas investment (especially unconventional projects) is expected to increase, so the bank sees this acquisition as positive. The purchase price is about RMB 2.98 billion (paid in full cash), which is only equivalent to 7.7 times the price-earnings ratio in 2022, which is lower than the current valuation of peers Jerry shares (002353.SZ) (12.8 times) and Sany International (about 11 times).

Assuming that Sany Oil's profit increases 30% year over year this year, this acquisition will increase Sany International's profit by 20% in 2023 (annualized). Given that Sany International is currently in a net cash position, as idle cash is used, the company's return on equity will increase as a result. We continue to be optimistic about Sany International's development strategy to drive the company's profitable growth through acquisitions.