Event
The company released a report for the first quarter of 2018 that operating income increased by 107.5% year-on-year to 9.57 million yuan, while net profit belonging to shareholders of listed companies increased by 24.6% year-on-year, reducing losses by 2.2 million yuan.
In April 2018, the company once again won the bid for the UGV gas field project in Ukraine, with a total of 5 drilling rigs in five blocks, with a total winning amount of US $115 million, with an average annual contract value of 241 million yuan.
Comment
Operating income doubled in the first quarter, and seasonal losses will be weakened with the development of overseas business. Benefiting from last year's drilling business to this year, the company's operating income grew by 107.5% in the first quarter and its loss narrowed. The company's drilling business is concentrated in northern Xinjiang, and it is difficult to operate in the cold winter, resulting in a traditional seasonal loss in the first quarter. As the business expands to Ukraine, Sichuan and other regions, the seasonal losses in the first and fourth quarters will gradually weaken.
Backed by Mahu oil field, vigorously develop the Ukrainian market, the future business is expected to go to the Middle East. The company made significant progress in overseas market development in 2017 and 2018, winning the bid for the Ukrainian Natural Gas drilling and production Company (UGV) drilling project for two consecutive years, with a total bid amount of 1.12 billion yuan, accounting for 170% of the company's 2017 operating income, with an average annual amount of nearly 400 million yuan. the company's overseas business is expected to rise from less than 1% in the past to about 40%. In 2017, the company added 10 drilling rigs, and the domestic business revenue increased by 51%. The company relies on Mahu Oilfield and enters the Tarim and Sichuan shale gas markets. It is expected that the domestic market will also make great progress in the future. The company's general manager's work report pointed out that the Ukrainian market will be used as a bridgehead to develop the Iraqi market, and it will become an important overseas goal to move towards a high-yield region in the Middle East in the future.
Profit forecast
In 2017, the company's domestic business grew by 51%, and once again won the Ukrainian 720 million drilling project. It is proposed to increase 7 shares for every 10 shares and pay out 1.1 yuan. From 2018 to 2020, the company is expected to achieve net profits of 0.82,1.32 and 163 million yuan respectively belonging to the shareholders of the parent company, equivalent to 0.69,0.65 and 0.80 yuan per share of EPS, and the corresponding PE is 57.5,35.84,29.02 times respectively.
Risk hints: the implementation rate of OPEC production limit agreement is too low, the situation in Ukraine has undergone a major change, the production of shale oil and gas in the United States is much higher than expected, and exchange rate risk.