Events:

On the evening of July 13, the company issued a semi-annual performance forecast that the net profit attributed to shareholders of listed companies in the first half of 2023 is expected to be 430-450 million yuan, an increase of 102.43%-111.84% over the same period last year. The net profit after deducting non-return is 425-446 million yuan, an increase of 101.87% and 111.36%.

The growth of exploration business resonated with the boom of oil service business, and the performance reached a record high in the first half of 2023, which was mainly the result of the accelerated growth of exploration business and the upward resonance of oil service engineering business. In a single quarter, Q2 achieved a net profit of RMB 2.18-238 million in 23 years, an increase of 56%, 70% and 3%, respectively, compared with the same period last year.

In the exploration business, the company aims to give full play to the advantage of integration, speed up the exploration evaluation of Wensu block, carry out stable production and increase production of oil fields, and do a good job in geological research, deployment of exploration wells, reserves research and commissioning of new wells. The company's Wensu project achieved crude oil output of 275100 tons in the first half of 2023, an increase of 77200 tons over the same period last year, an increase of 39.01% over the same period last year, and crude oil sales revenue continued to grow.

The oil service engineering business has benefited from the improvement of capital expenditure on international oil and gas exploration. The operating rate of the company's overseas drilling rigs has increased significantly compared with the same period last year, and the revenue of the engineering sector has increased significantly compared with the same period last year. At the same time, the company has optimized management and strictly controlled costs and expenses. Remarkable results have been achieved in reducing costs and increasing efficiency.

The overseas layout strengthens the growth attribute, and the high-quality oil field ensures the growth prospect company is also actively promoting the overseas business layout, acquiring the Kazakh coastal oil fields and the oil and gas fields under construction in Tengo, of which the tenge project has estimated geological reserves of 64.41 million tons of crude oil and the shore project has estimated geological reserves of 25.23 million tons. The company's domestic Wensu block 1086.26 square kilometers of oil and gas exploration rights have now proved geological reserves of 30.11 million tons, Wensu II preferred 440km2 address research and exploration well work has been carried out in an orderly manner. Regardless of the oil production of tenge and shore blocks, the company's crude oil production in 23-25 years can also reach 500000 tons, 650000 tons and 800000 tons. The company's three oil fields at home and abroad have the advantages of low cost and abundant reserves, which continue to open up the space for growth.

Earnings forecast, valuation and rating

We estimate that the company's income in 2023-25 will be 38x46 / 5.5 billion yuan respectively, with a corresponding growth rate of 23%, 22%, 19%, 9.2, 12.8, and 1.53 billion yuan, respectively, and a corresponding growth rate of 83%, 38%, 20%, 2.3, 3.19, and 3.82 yuan per share. In view of the rapid development of the company's core exploration business and large room for growth, we maintain the company's target price of 28.48 yuan and maintain the "buy" rating.

Risk hints: a sharp drop in oil prices, slower-than-expected production progress in Wenbei Oilfield, and instability in the international situation