1H20 performance meets performance forecast
The company reported 1H20 results: revenue fell 12% year-on-year to 1.8 billion yuan, while net profit fell 49% year-on-year to 31.16 million yuan, in the median range of previous forecasts.
The company's 1H20 gross profit margin improved by 1.7% over the same period, so despite a year-on-year decline in revenue, the company's 1H20 gross profit increased 9% year-on-year to 610 million yuan, and operating profit increased 17% to 170 million yuan. However, the company's financial costs surged 172% year-on-year to 110 million yuan, mainly due to an increase in interest costs and a year-on-year decline in exchange earnings during the period.
The company's 1H20 report reclassifies the plate, mainly putting the sales of fracturing equipment and fracturing services into the fracturing business sector separately, and the rest is restructured into spare parts and other drilling engineering services, while the land drilling rig sector has not changed. After redividing, we found that the operating profit margins of 1H20 parts and other sectors increased by 6.1% compared with the same period last year, directly making up for the decline in profit margins of other sectors.
The company's 1H20 drilling footage increased by 38% year-on-year to 56000 meters; the number of pump injection segments increased by 70.4% to 2009 segments, accounting for 68% of the 2019 annual workload; the company's fracturing service revenue also basically doubled compared with the same period last year; 1H20 achieved sales of 2 sets of electric fracturing pumps. We believe that this also reflects that the current development cycle of the shale gas market is limited by the epidemic and low oil prices.
As of June 30, the company's outstanding contract amount totaled 2.03 billion yuan, and the proportion of complete drilling rigs, spare parts, fracturing business and drilling engineering business was 19%, 54%, 13% and 14%, respectively.
Trend of development
Wind power business to improve the company's anti-cyclical, help marine plate fundamentals to improve. At the performance meeting, the company's new business of offshore wind power attracted the attention of investors. The company's 1H20 has signed a total of 580 million yuan in newly signed orders and delivered the first wind power project in July. We expect that the wind power project is expected to bring two benefits to the company: 1) expand the coverage of the industry, improve the company's anti-cyclicality, and increase the company's profits; 2) entrust the marine sector as a contractor to execute orders using the existing offshore platform, it is expected to help improve the profitability of the marine sector and improve the repayment ability of the marine sector. The company's management said that in the long run, the company will seek the extension and transformation from offshore wind power manufacturing to service industry.
Pay attention to the company's performance in 2021-22. The company's electric fracturing pump achieved large-scale financial lease sales in 2018-19, and we expect the company's fracturing services sector to usher in a profit release cycle when the lease expires in 2021-22.
Profit forecast and valuation
Keep the profit forecast unchanged. The current share price corresponds to a price-to-earnings ratio of 9.8 times 2020. Maintain an outperform industry rating and a target price of HK $0.90, corresponding to 35.9 times 2020 p / e.
Risk.
The newly signed order and order execution are not as expected.