Main points of investment
The company released the third quarter 2017 performance report and 2017 performance forecast: the company's operating income in the first three quarters of 2017 was 1.079 billion yuan, an increase of 52.86% over the same period last year; the net profit of shareholders belonging to listed companies was 77.3465 million yuan, down 26.68% from the same period last year, corresponding to 0.07 yuan of EPS. The net profit of shareholders belonging to listed companies is expected to be 170 million yuan to 210 million yuan in 2017, an increase of 30.00% 60.00% over the same period last year.
Pakistan EPC project revenue gradually confirmed that in the first three quarters, the company's revenue increased by 52.86% compared with the same period last year. During the industry downturn, the composite gross profit margin fell 11.26 percentage points compared with the same period last year. Revenue from the overseas Pakistan EPC project has gradually confirmed that the company's revenue has maintained considerable growth during the industry downturn, with newly recognized sales revenue of 489 million yuan in the first three quarters of 2017. By the end of the reporting period, the cumulative confirmed sales revenue reached 870 million yuan. During the period of recovery at the bottom of the industry, the quality of orders was low. In the first three quarters, the company's comprehensive gross profit margin was 23.67%, down 11.26pct.
Foreign exchange losses led to a substantial increase in financial expenses; associated enterprises contributed investment income, and the net interest rate increased by 7.40 percentage points in the third quarter compared with the previous quarter. Affected by exchange losses caused by fluctuations in the RMB exchange rate, the company's financial expenses in the first three quarters were 76.5896 million yuan, a sharp increase of 1112.59 percent over the same period last year, accounting for 7.10 percent of revenue, an increase of 6.20 percent over the same period last year. In the first three quarters, the company's investment income in joint ventures and joint ventures was 100 million yuan, of which in the third quarter, the investment income reached 59.165 million yuan, helping the company's quarterly net interest rate rise to 8.93%, an increase of 7.40 percentage points compared with the second quarter. Taken together, the company's net interest rate reached 7.17%.
Winning the bid for Iraq EPCC project, overseas projects in hand are full, and will continue to contribute to the company's revenue. In October 2017, the company received a "general engineering contract" for the Iraqi EPCC project signed with PCIHBV, with a contract value of about 400 million yuan. At present, the revenue recognition of the EPC project in Pakistan has been gradually completed; the EP project in Kazakhstan is being gradually implemented. The company is full of overseas projects on hand, and the initial production is smooth, and the revenue is expected to be gradually recognized by the end of the year and continue to contribute to the company's revenue.
Profit forecast and rating: the company is the leader of integrated oil service, with rich experience in overseas engineering general contract business and full orders on hand. With the smooth progress of the project, revenue will be determined step by step. We estimate that the company's EPS for 2017-2019 will be 0.17 EPS 0.35pm 0.47 yuan, corresponding to the current share price PE is 32x/16x/12x, maintaining the "overweight" rating.
Risk hint: overseas projects are not progressing as expected; oil prices have fallen sharply.
