Event
The company released the 2018 interim results report, operating income increased 18.17% year-on-year to 242 million yuan, net profit belonging to shareholders of listed companies increased 12.19% year-on-year to 20.3 million yuan.
Comment
Operating income and net profit increased slightly, while cash flow from operating activities decreased significantly under the influence of industrial layout. Due to the late start in northern Xinjiang, drilling footage fell 12% in the first half of the year compared with the same period last year, but drilling operations in Ukraine increased revenue and profits per unit footage, and the company's operating revenue and profits improved compared with the same period last year. At the same time, the company's overseas and domestic layout in the first half of the year led to a substantial increase in market expansion, pre-project costs and personnel costs compared with the same period last year, reducing the cash flow of operating activities and increasing management and sales expenses.
The layout of the company's service area has been basically completed, forming two major base areas. Since its listing, the company has gradually expanded its business to the overseas Ukrainian market, Sichuan shale gas market and Tarim gas field market, and has established subsidiaries in Nanjiang, Sichuan shale gas, Dubai and other service areas. Investment in the establishment of perforation, oil equipment design and other subsidiaries to improve service capabilities. In the past two years, the company has won two consecutive drilling projects in Ukraine, totaling 1.12 billion yuan. at present, four deep well drilling rigs have begun construction, and it is expected to expand to more than 10 deep well drilling rigs to serve together in the future. Ukraine has become the company's second base after the northern Xinjiang market.
The company's two deep wells have also reached the Sichuan shale gas service market and are expected to begin to contribute profits by the end of the year, and the established subsidiaries of Nanjiang and Dubai are expected to open up new drilling service markets locally, so that the company's domestic and foreign market layout has been basically completed.
Profit forecast
In the first half of 2018, the company completed the layout of Ukraine, Sichuan shale gas and southern Xinjiang market, and will begin to contribute profits this year. From 2018 to 2020, the company is expected to achieve net profits of 0.88,1.32 and 163 million yuan respectively belonging to the shareholders of the parent company, equivalent to 0.43 yuan, 0.65 yuan and 0.80 yuan per share of EPS, and the corresponding PE is 37.0,24.6,19.9 times respectively.
Risk hint: the implementation rate of OPEC production limit agreement is too low, the situation in Ukraine has changed significantly, and the production of shale oil and gas in the United States is much higher than expected.