The Q1-3 performance in 2017 is expected to increase by 20.05 to 20.35 times, and Q3 by 1.6 to 1.9 times in a single quarter.
The company issued a forecast for the first three quarters: the net profit of Q1-3 in 2017 is expected to be 0.78-79 million yuan / + 2005%-2035%, of which it is expected that Q3 will achieve a net profit of 622.06-9.3309 million yuan / + 160%-190% in a single quarter. The forecast results are in line with our expectations, and the reasons for the expected substantial increase in 2017Q3 and Q1-3 results include: 1) the company lost a large amount last year, while Q1-3 made a profit of only 3.713 million yuan; 2) under the company's collectivization development strategy, the production and sales of high-end equipment manufacturing business, such as distributed energy, supply chain finance, centrifugal compressors and steam turbines, are constantly expanding, and orders and revenue from various sectors of the company are increasing rapidly.
The five major business plates have taken shape, and the whole industry chain has achieved remarkable results.
The company has started from an enterprise providing technical services for oil field exploration and development software at the beginning of its listing. It has developed into a high-tech, collectivized and integrated technical service company that integrates energy exploration and development software and hardware, and integrates modern intelligent technologies such as big data, digitalization, cloud computing and high-end manufacturing. Over the past 15 years, the company's business structure has been deeply optimized and adjusted, with the healthy and orderly development of the five major business sectors: Groug (Geology and Geophysics), engineering technology, core precision instrument and high-end equipment manufacturing, cloud computing and big data, and new business development (environmental protection business, investment and financing business, etc.) Outstanding performance includes: the growth stabilization of traditional business, the rapid growth of new incubation business, the large-scale growth of distributed energy and clean energy and high-end equipment manufacturing business, and the normalization of investment income.
West oil combined with geothermal drilling and completion technology is mature, geothermal development order reserve is sufficient.
China's Xiongan and other areas are endowed with unique geothermal resources. According to China Petroleum & Chemical Corp News Network, China Petroleum & Chemical Corp will continue to increase geothermal development efforts. According to the field investigation of China Petroleum & Chemical Corp Xinxing Company, we know that drilling and completion accounts for about 1x3 of the total geothermal investment. West Oil combined with geothermal drilling and completion technology is mature, and it has rich geothermal project experience and order reserve, especially in high temperature well technology.
Its companies, Xinjinhua and Sichuan Oil, design deep ploughing in the field of natural gas, which is expected to further boost profits.
New Jinhua has the ability of complete centrifugal compressor and steam turbine testing and overall linkage test. Sichuan Oil Design has signed and is implementing a number of EPC project contracts, which has become an important focus and development platform for the group to expand the development of clean energy and distributed energy industry. With the continuous growth of investment in natural gas, the natural gas sector is expected to become a new performance growth point for companies in the future.
Maintain earnings forecasts and "buy" ratings
We expect to achieve operating income of 20,27 and 3.7 billion yuan and net profit of 2.8,4.0 and 560 million yuan respectively from 2017 to 2019, corresponding to EPS of 0.39,0.56 and 0.79 yuan per share, and corresponding PE of 32, 22 and 16 times. Considering that our previous forecasts for the recovery of the company's orders and results have been strongly confirmed by the China report and the three quarterly reports, the company's earnings are in a stage of rapid growth, we have raised the reasonable PE for 2017 to 39341 times, and raised the target share price to 15.2-16 yuan. Maintain a "buy" rating.
Risk hint: international crude oil prices are down; geothermal drilling business and natural gas business expansion are not up to expectations.