This report is read as follows:
The acquisition of high-quality assets at the bottom of the industry actively thickens the company's performance; the capital expenditure of the three major oil companies has increased, and Sitan Instruments has directly benefited.
Main points of investment:
Conclusion: the company intends to acquire no less than 60% stake in Sitan Instruments in cash, and the acquisition of high-quality assets at the bottom of the industry will greatly increase the performance of the company. Considering that the increase in capital expenditure of oil companies is transmitted to oil service companies with a time lag of about 1-2 years, it is estimated that EPS will be 0.07 (- 0.18) / 0.15 (- 0.22) / 0.24 yuan in 2017-2019. Assuming that 100% equity of Sitan Instruments is acquired, the pro forma EPS will correspond to 0.2cusp 0.3max. Considering the downward movement of the valuation center, the target price will be lowered to 14 yuan to maintain the overweight rating.
The bottom of the industry buys high-quality assets and actively thickens the company's performance. ① acquired 27.82% of Stan Instruments in 2016. The company announced that it intends to use cash to acquire a further 60 per cent stake in Stan Instruments, which is reasonable at a valuation of 800m, corresponding to about 11 times PE in 2017. ② Sitan Instruments promises to deduct non-net profit of not less than 7000max / 85 million yuan in 2017-19, which will significantly increase the company's performance if the acquisition is completed. ③ Sitan Instruments has excellent texture and is the largest manufacturer of specialized instruments such as well logging and well testing in China. The revenue volume of Sitan Instruments is similar to that of the company, with a gross profit margin of about 60% and a non-net profit margin of 21%, with high profitability.
Sitan Instruments directly benefited from the increase in capital expenditure of the three major oil companies. ① OPEC cut production to boost oil prices, the three major domestic oil companies raised capital expenditure, ending the trend of spending reduction in recent years, and the industry bottomed out. The main customers of ② Sitan Instruments are Petrochina Company Limited and China Petroleum & Chemical Corp, which directly benefit from the increase in capital expenditure of oil companies. With the decline of oil prices in recent years, the output of domestic oil fields has not decreased significantly in order to keep increasing production, and the company's performance is relatively less affected by oil price fluctuations. It is expected that the profitability of Sitan Instruments is expected to be further enhanced in the future as the global crude oil supply rebalances and oil prices recover.
Catalyst: smooth integration of underlying assets.
Risk hint: the risk of acquisition failure and lower-than-expected capital expenditure of oil companies.
