Achieve high growth in interim performance
Hailong Holdings announced its mid-term results in 2019, with operating income of 1.86 billion yuan in the first half, an increase of 23.6 percent over the same period last year, a net profit of 150 million yuan, a sharp increase of 110.2 percent over the same period last year, and earnings per share of 0.09 yuan.
The two major businesses of oil field equipment manufacturing and oil field service continue to recover.
Led by the sustained recovery of the oil and gas market, the company's core business has grown strongly. The oil field equipment manufacturing and service division achieved revenue of 840 million yuan, an increase of 27.0% over the same period last year, mainly due to an increase of more than 400% in drill pipe revenue in the domestic market and a substantial increase in OCTG coating service revenue. The revenue of the pipeline technology and service division reached 2.01 billion yuan, an increase of 2.8% over the same period last year, mainly due to the increase in revenue from oil and gas pipeline coating services, CWC services and pipeline inspection services. The oil field service division achieved revenue of 690 million yuan, an increase of 50.6% over the same period last year, mainly due to the increase in the utilization rate of drilling rigs and the increase in revenue from OCTG trade and logistics services, while Oman drilling rigs and Iraqi workover rigs entered the service period. The revenue of the marine engineering service division reached 120 million yuan, a decrease of 34.0% over the same period last year.
Actively open up domestic and foreign markets, profitability is expected to continue to improve
The company's comprehensive gross profit margin in the first half of 2019 was 32.8%, up 0.3 percentage points from the same period last year. Among them, the gross profit margins of oil field equipment manufacturing and services, pipeline technology and services, oil field services and marine engineering services are 35.6%, 31.4%, 35.4% and 0.7%, respectively, and the year-on-year changes are-1.8 percent, 3.1 percent, 1.1 percent, 7.3 percentage points, respectively. The net interest rate was 8.1%, up 3.0 percentage points from the same period last year, mainly due to an increase in exchange gains and a decrease in financial expenses. The company has actively opened up domestic and foreign markets, increased drill pipe sales in southwest, Changqing and Tarim, signed a long-term drilling service contract in Nigeria with Shell, signed a three-year total supply agreement of US $3000 with Ensign of Canada, and won a drill pipe order of 90 million RMB from NDC Company of the United Arab Emirates.
Performance continues to recover, maintaining "buy" rating
We have raised the company's 19-21 EPS forecast to RMB 0.15, 0.19, 0.22, to reflect the positive impact of the company's recent good order taking and market expansion on future performance. The company has traded at an average of 9.3 times PE (TTM) in the most recent year, and we are cautious about giving the company 8 times PE in 2019, raising its target price to HK $1.30 and maintaining a "buy" rating.
Risk hints: overseas geopolitical situation risk, exchange gain and loss risk, US trade policy change risk