Main points of investment:

1. Event

The company issued a semi-annual performance forecast for 2016, showing that the net profit belonging to shareholders of listed companies from January to June 2016 was 12.965 million yuan to 23.338 million yuan, down 55% and 75% from the same period last year.

The company announced that Xi'an Aohua, a holding subsidiary, is going through the formalities of listing in the national share transfer system for small and medium-sized enterprises.

two。 Our analysis and judgment

(1) the industry downturn has led to a decline in performance, actively laying out the oil and gas industry chain. According to the company's announcement, the company's net profit in the first half of 2016 was 12.965 million yuan to 23.338 million yuan, down 55% and 75% over the same period last year. The main reason is that the oil and gas industry as a whole is still in the doldrums, and the company's original business has declined due to the continuous reduction of investment in the industry.

The company seized the opportunity during the industry downturn and completed the acquisition of Xinjinhua and Sichuan Oil Design during the reporting period, which improved the layout of the upstream and downstream of the company's industrial chain and enhanced the company's comprehensive competitiveness.

As the listed company with the most perfect layout of the domestic oil service industry chain, we believe that the company will benefit from the rebound in oil prices in the future.

In addition, Zhongying Anxin and Omec, the holding company, have been listed on the new third board, and the holding subsidiary Xi'an Aohua is going through the listing procedures in the national share transfer system for small and medium-sized enterprises. The company has announced that it has signed an equity transfer agreement with Zhongying Anxin, promising to transfer 304-7.5 million shares. The cost of the company's shareholding is about 7.3 yuan per share. We believe that the company is expected to transfer some of the shares of the holding subsidiary / Sun company, and will enable the company to obtain a higher return on investment, and the full-year performance is still expected to achieve rapid growth.

(2) signing trade framework agreements with China and overseas Energy to expand business areas and contribute to performance growth

Recently, the company and China overseas Energy have completed the signing of the Strategic Framework Agreement between Hengtai Epp and China overseas Energy Co., Ltd. (hereinafter referred to as "Framework Agreement") in Beijing.

According to the framework agreement, at the initial stage, the two sides will focus on oil-related products such as fuel oil, lubricants and other chemical products, with domestic trade as the main trade. In the future, the two sides will gradually expand the variety of trade and extend to international trade. Hengtai Epp will directly purchase related products from upstream refineries and chemical plants and supply them to China and overseas to complete the entire trade process, with a business cycle ranging from one month to three months.

The amount of trade agreed between the two sides is 1.5 billion yuan per year, and the term of the contract is three years. Before the termination of this Agreement, either party may apply for an extension, and after friendly consultation, this Agreement may be extended for a period of 3 years.

According to the company announcement, the smooth implementation of the project will expand the overall revenue scale of the company in the future, and have a certain positive impact on the company's performance.

(3) Integration of existing resources, future development of clean energy and environmental protection in order to achieve collectivized development, the company integrates existing resources and technology to build three sectors with great potential for development: RRDSL, a drilling company, and Xiyou, a joint company to form Daxi Oil Engineering Company, to provide on-site services in oil fields. Integrate Hengtai Epp's original VR business and sales capacity with Boda Ruiheng GambiG business and sales capacity to establish Hengtai Epp Research Institute to improve efficiency; set up a cloud technology company, which is based on Internet + 's oil and gas exploration and development technology, and combines big data and cloud computing to develop and construct industry GambiG technology and non-industry VR technology.

In terms of environmental protection business, the company acquires New Jinhua and Sichuan Oil Design, which can promote non-pipe network methods to solve natural gas supply, improve energy structure and reduce air pollution in small villages and towns in the future.

At the same time, the company invested 10 million yuan in Heilongjiang Shanda Environmental Construction Engineering Co., Ltd., combining the technical advantages of "Sanhua water" such as oil chemical industry, coal chemical industry and pharmaceutical chemical industry, the distributed and intelligent solution of sewage in villages and towns will be promoted and implemented in the future. Through cloud watch, low cost, cloud management, Internet of things, effectively solve the problem of sewage in villages and towns.

(4) to lay out the natural gas application industry chain, the embryonic form of the comprehensive energy service group has been successfully acquired this time, Hengtai Aipu will hold 95.07% equity interest in Xinjinhua and 90.00% equity stake in Sichuan Oil Design.

New Jinhua's main business is the R & D and manufacturing of centrifugal compressors, which is at an advanced level in a number of sub-application fields: new Jinhua is at an advanced level in the field of domestic synthetic ammonia centrifugal compressors; it has made a breakthrough in long-distance natural gas pipeline compressors for natural gas transmission, and its self-developed 8.3MW natural gas transmission compressor unit has been in stable operation in Pakistan natural gas pipeline.

During the 13th five-year Plan period, with the strengthening of national efforts to control haze, natural gas instead of coal will be developed rapidly. According to the plan of the National Development and Reform Commission, by 2020, natural gas consumption will account for more than 10% of primary energy consumption, the utilization will reach 360 billion cubic meters, and the annual compound growth rate of natural gas consumption will reach 14% from 2015 to 2020.

Centrifugal compressors are used for pipeline transportation and pressurized liquefaction in the field of oil and natural gas. in the future, with the annual increase of domestic natural gas consumption, the demand of centrifugal compressors is expected to maintain a steady growth.

The main business of Sichuan Oil Design includes three types of design services: gas field gathering and transportation, long-distance oil and gas transportation and town gas. The length of China's natural gas pipeline network is about 100000 km in 2015, and the total scale of the long pipeline network is planned to reach 150000 km by 2020, with an average annual growth rate of about 8%.

The acquisition of New Jinhua and Sichuan Oil Design will help the company's industrial layout cut into oil and gas transportation and oil and gas equipment manufacturing, and is an important measure for the company to expand the upper and lower reaches of the industrial chain, expand its asset scale and enhance its profitability. and will help the company to achieve the goal of a comprehensive energy service group.

(5) the acquisition of Western Oil Union, Anteri Energy, Chengdu Omec, and the construction of an integrated international oil service company in April 2013, the company acquired a 27.6% stake in Anterra Energy Inc. (hereinafter referred to as "Anteri"). Anteri is committed to oil and gas development in the western Canadian basin, with the main production blocks being "Brighton" and "Bacon". The company also has oil and gas processing plants to support the operation of the company's mid-stream industry.

Through the strategic investment in Anterui, it will help the company to open up the service market of small and medium-sized oilfields in the United States and Canada; at the same time, through the in-depth study of Anterui oilfield blocks, there will be opportunities for the company and its member enterprises to provide first-class and large-scale technical services for similar large-scale oilfield blocks, so as to further improve the company's profitability and level.

In October 2013, the company acquired the remaining 49% stake in Chengdu West Oil United Oil and Gas Engineering Technology Co., Ltd. The main business of West Oil Union is oil and gas field product and equipment integration services, project contracting and services.

Through the wholly-owned holding of West Oil Union, the company has added new oil and gas field engineering and technical service capabilities, enhancing the company's competitiveness and market share in the oil service industry. Considering the previous acquisition of Spartek Systems Inc. And Langfang New Saipu, the company has been able to provide oil service industry chain services ranging from oil and gas exploration data interpretation and processing, well logging to oil field engineering, and has initially become a comprehensive international oil service company.

In January 2016, the company announced that Chengdu European and American Ke has completed the public transfer of shares in the national share transfer system for small and medium-sized enterprises, the securities code is 835563. The listing of the new third board will help to improve its incentive mechanism, stabilize and attract talents, and enhance its core competitiveness; at the same time, it can introduce new strategic investors to provide a basis for the long-term development of Europe and the United States.

(6) in 2013, Boda Ruiheng, a wholly-owned subsidiary of the company, used 186.66 million yuan to acquire a 51% stake in Zhongying Anxin Technology Services Co., Ltd. (hereinafter referred to as "Zhongying Anxin"). Zhongying Anxin promises that the audited net profit after tax attributable to the owner of the parent company after deducting non-recurring profits and losses in 2013, 2014, 2015 and 2016 will not be less than 28.15 million yuan, 37.5 million yuan, 47.5 million yuan and 49.5 million yuan, respectively.

Zhongying Anxin mainly provides all-round information and related technical services with safety as the core and integration as the goal for the oil and gas industry. Including the upstream oil and gas fields, the middle reaches of long-distance oil and gas pipelines, LNG receiving stations and downstream refining and other terminal facilities design, construction, construction, operation, maintenance of the whole life cycle of information management and safety production operation guarantee services.

Zhongying Anxin has a number of independent research and development of core proprietary technology and patented technology, put forward the two-dimensional and three-dimensional integration technology of digital oil and gas fields, breaking the technology and market monopoly of foreign companies in the industry. This acquisition will help Boda Ruiheng to further expand its business areas and customer resources, strengthen the oil and gas technical service business segment, and enhance its competitiveness and market share in the oilfield technical service industry; at the same time, it will help the company to enter the "digital oil field" and achieve the goal of the energy group.

In December 2015, Zhongying Anxin officially listed for public transfer on the new third board with the securities code 834728.

(7) in March 2012, the company acquired 51% of Beijing Boda Ruiheng Technology Co., Ltd. (hereinafter referred to as "Boda Ruiheng"). In October 2013, the company acquired the remaining 49% stake in Boda Ruiheng. At present, Boda Ruiheng is a wholly owned subsidiary.

The company and Boda Ruiheng are both oil service software and related service providers. after the company wholly controls Boda Ruiheng, Boda Ruiheng stops selling products that have a strong competitive relationship with Hengtai Ep. and from the point of view of product complementarity, a new variety of agents is added, which improves the coordination and unity of parent-subsidiary products. At the same time, the company granted Boda Ruiheng the agency of Simo2D/3D and SeisFast products in some market areas, which helps to expand the company's product sales channels.

This acquisition will help to increase the company's market share in oil and gas exploration and development software technical services, optimize the company's management structure, and align the company's interests with its holding subsidiary Boda Ruiheng. And help the company to find high-quality targets of overseas oil and gas exploration and development software.

(8) Oil and gas exploration software technology is leading in China, and through mergers and acquisitions, it has entered the traditional main business of oil service instrument and equipment manufacturing companies to serve oil and gas exploration and development software technology, specifically for the development and sale of oil and gas exploration and development software. use these software and related technologies to provide services such as seismic data processing, comprehensive interpretation and reservoir development scheme design for the exploration and development of oil companies. Help oil companies to reduce exploration risks and improve the success rate of exploration and the efficiency of resource exploitation.

The technical strength of the company's oil and gas exploration and development software is in the leading level in China, especially in the exploration and development technology of complex reservoirs, the company has a number of characteristic technologies. The software developed by the company covers the main links of exploration and development, such as seismic data acquisition and design, processing, interpretation, comprehensive reservoir research and reservoir modeling, and has unique technology and software products in geological mapping.

The company acquired Canadian Spartek Systems Inc in 2012. And Langfang New Saipu 34.8%, 100% equity, into the oil and gas equipment and equipment industry.

Based on the technical services in the process of oil and gas exploration and development, the company has entered into the field of production and sales of high-end oil and gas instruments and special equipment through the investment of Spartek Systems and the acquisition of Langfang New Saipu.

3. Investment suggestion

Considering the designs of Xinjinhua and Sichuan Oil, it is estimated that the EPS for 2016-2018 is 0.19xb 0.30 yuan, PE is 55-40-35 times; if Zhongying Anxin equity transfer is taken into account, the 2016-2017 performance is expected to be 2.05 yuan and 287 million yuan, and the PE is 26 times. Through the acquisition and layout of oil service and natural gas operation industry chain during the industry trough, subsidiaries Zhongying Anxin and Chengdu Omec have been listed on the new third board, benefiting from the rebound in crude oil prices and the continued growth of domestic natural gas consumption in the future. maintain a "recommended" rating.

Risk tips: crude oil prices fell sharply and post-acquisition integration was lower than expected.

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