The company is a leading large module builder in China. Under the background of the vigorous development of LNG trade and natural gas chemical industry in the Asia-Pacific region and the strong recovery of domestic offshore oil and gas, the company has signed several large orders in recent years, with current orders in hand exceeding 6 billion yuan, and the potential market size in the next 3 years is nearly 100 billion yuan. It is expected that the company's performance will grow rapidly in the next 2 to 3 years. With reference to the valuation level of Hong Kong stock companies in the same industry, according to the valuation of 9 times PE in 2020, the target price is 1.00 yuan (about HK $1.10), covering the "buy" rating for the first time.
The company is a leading domestic oil and gas and marine engineering module builder with superior site conditions. The company is mainly engaged in oil and gas, marine equipment construction and technical services. at present, it has two well-equipped manufacturing bases, with a total area of about 1 million square meters in Penglai. It has a 50, 000-ton and several 10, 000-ton waterway and wharf, and the Zhuhai site is about 480000 square meters, which can build projects with a single component less than 3000 tons.
From 2014 to 2017, the company has undertaken the construction of 105000 tons of pipe corridor modules for the YAMAL LNG project, and has become a leading domestic and international well-known module builder. Since 2018, the company has been awarded the core module construction project of GCGV Olefin Chemical Plant and Arctic LNG 2, and currently has an outstanding order of more than 6 billion yuan.
The market prospect of modular construction business is broad, and the policy promotes the strong recovery of domestic offshore oil and gas. Compared with traditional construction methods, modular construction has both time and cost advantages. in the next few years, modular construction in the Arctic Circle, the Pacific Rim and Europe will have a huge demand and broad market prospects. The Seven-year Action Plan promotes a strong recovery of the domestic offshore oil and gas boom, and CNOOC's capital expenditure continues to grow, which will benefit the company's offshore oil and gas engineering and technical services business at the Zhuhai site.
The company's state-owned assets background and site advantages have laid a solid foundation, the module construction capacity is widely recognized, and the market scale of module construction that can participate in the competition in the next 3 years is nearly 100 billion. The advantages of the existing Penglai and Zhuhai sites complement each other, so that the company has the construction capacity of 1000 tons to 50 thousand tons (single component) in many subdivisions of oil and gas and marine engineering. Relying on previous projects, the company has established good mutual trust with relevant owners, and has been committed to opening up new markets for a long time. It is expected that the module construction market that the company can compete for in the next 3 years is nearly 100 billion yuan. The company attaches importance to R & D, management and management have more than 15 years of industry experience, are gradually strengthening project design capabilities, have taken part in the design tasks in GCGV and Arctic LNG 2 projects, and are expected to gradually move forward to the role of EPIC general contractor with high technology content and high gross profit margin in the future.
Risk factors: the risk that the progress of the implementation of the project is not as expected; the risk that newly signed orders are not as expected; and the risk that a sharp decline in international oil prices leads to a decline in the prosperity of the offshore oil and gas industry.
Investment suggestion: at present, more than 6 billion yuan is in hand to help the company's performance grow rapidly in the next two years, and the company is expected to benefit from the broad market prospect of module construction business and continue to grow. It is estimated that the company's homing net profit from 2019 to 2021 is 0.05 million yuan, respectively, and the corresponding EPS forecast is 0.17 yuan for 0.11 yuan, respectively, and the compound growth rate for 18-21 years is 117%. The current stock price corresponds to 201-5-3 times the PE valuation. With reference to the corresponding valuation level of Hong Kong stock companies in the same industry in 2020, the company was given 9 times PE in 2020, corresponding to the target price of 1.00 yuan (equivalent to HK $1.10), covering the "buy" rating for the first time.