This report is read as follows:
With the promotion of the fixed increase of major shareholders, the company's oil and gas expansion in Kazakhstan is likely to make substantial progress in 2014H2. After the fixed increase is over, it is conservatively estimated that the company can pry overseas investment of at least US $10-1.2 billion.
Main points of investment:
We estimate that the company's EPS from 2014 to 2016 will be 0.03,1.06,1.76 yuan respectively, of which the profit estimate for 2015-2016 covers the profit from 10-1.2 billion overseas investment (of which the unfinished 210 million capital will be included in the cost of debt first). Give the company PE18.6 times in 2015, with a target price of 19.7 yuan, which is still 54% away from the current share price.
Sufficient funds provide a guarantee for the development of overseas oil and gas business. The company is expected to raise 430 million yuan in cash to major shareholders twice, based on an asset-liability ratio of 50%. It is assumed that the company can have at least 1.23 billion yuan of overseas oil and gas business investment capacity after the end of the fixed increase. As the excess profit tax on crude oil in Kazakhstan has smoothed the profit level of oil and gas producers, we estimate that according to the return period of Zhenghe shares' investment in Kazakhstan (about 4 years), according to the company's investment scale of 10-1.2 billion, it can probably bring an annualized net profit level of 250-300 million.
Overseas oil and gas development is the general trend of oil and gas reform to break the monopoly. Kazakhstan has become the choice of domestic enterprises based on its rich resources and relatively loose investment environment. First of all, the excess profit tax levied on crude oil by Kazakhstan smoothes the profit level of oil and gas producers, that is, it greatly reduces the investment risk of new entrants and ensures a reasonable rate of return on investment; secondly, the advantage of domestic enterprises in entering Kazakhstan lies in: the global leadership of secondary recovery and tertiary recovery technology is applied to the relatively backward Central Asian region, and there is more room for enhanced oil recovery. Finally, Kazakhstan's unique crude oil tax system has brought synergy and win-win results between oil and gas producers and oil service enterprises, making it one of the most suitable countries for domestic capital and oil service technology development.
Risk hint: international oil prices have fallen sharply; the company's overseas business process has slowed down.