Event: on May 18, the Chinese Geological Survey of the Ministry of Land and Resources announced that China's ongoing trial mining of combustible ice (natural gas hydrate) in the Shenhu area of the northern South China Sea has been successful. This marks that China has become the first country in the world to achieve continuous and stable gas production in the trial exploitation of combustible ice in the sea area.
Main points of investment:
China's first successful trial mining of combustible ice in the sea area, the company is expected to benefit from a huge amount of market space. Combustible ice is essentially natural gas hydrate, which is an ice-like crystalline substance formed by natural gas without water under the condition of high pressure and low temperature. it is mainly distributed in the permafrost of deep-sea sediments. Combustible ice is a new type of energy with high combustion value, clean pollution and huge reserves, which will only produce a small amount of carbon oxide and water after combustion; the total resources are equal to twice the total amount of known coal, oil and natural gas in the world. China's sea area alone has a storage capacity of about 80 billion tons of oil, and the world's resources are about 2100 trillion cubic meters. As most of the combustible ice is buried at the bottom of the sea, it is difficult to mine, and no country has achieved stable gas production for more than seven consecutive days before. This time, China has become the first country in the world to achieve continuous and stable gas production of combustible ice, which will significantly benefit the oil service industry chain. As a leading private oil service enterprise, the company is expected to benefit from the large-scale commercial exploitation of combustible ice in the future.
Overseas EPC, environmental protection and pipeline business keep pace with each other, promoting the company's rapid growth. Relying on the technical cost advantage of oil and gas equipment and engineering, the company actively distributes overseas EPC business. With the stabilization and recovery of international oil prices, upstream oil companies' capital expenditure on non-new capacity planning has rebounded, and the company's overseas EPC orders are expected to make new progress. At the same time, the company is actively developing environmental protection and pipeline business, with a newly signed environmental protection contract order of about 80 million yuan in 2016. on the basis of holding 84% stake in Weifang Kate, which is engaged in oil and gas pipeline automation system business, the company plans to expand 51% equity in Woodpecker Company. layout of oil and gas pipeline monitoring and inspection business, enhance the company's pipeline business of the whole industry chain service capacity. Environmental protection and pipeline business are expected to become new profit growth points of the company.
Acquire shares in Andong DMCC and set up an oil and gas industry alliance to help overseas business development. The expansion of the company's stake in Anton DMCC40% is conducive to the company's business development in Iraq and even the Middle East; at the same time, the company's deep cooperation strategic agreement between the Anton Group and InterContinental Oil and Gas helps to enhance the company's international influence and market competitiveness. Under the active promotion of the "Belt and Road Initiative" strategy, the improvement of the company's integrated service capability and the resource sharing and complementary advantages brought about by the strategic alliance help the company to develop its overseas business.
Maintain the "highly recommended" rating. It is estimated that the net return profit of the company in 1719 is 3.43 RMB 4.62 / 597 million yuan, the corresponding EPS is 0.32,0.43 and 0.56, and the corresponding PE is 21, 16 and 12 times, respectively. Give the company 30 times PE in the next 6-12 months, corresponding to the target price of 9.6 yuan, and maintain a "highly recommended" rating.
Risk Tip: the rise in international oil prices is not as expected, and overseas EPC business development is not as expected.