Investment highlight
Under the threshold of high barrier industry, the whole industry chain specializes in the pioneer of high-end energy management. The oil and gas pipe industry has a high degree of professionalism, which requires strong R & D technology accumulation, stable channel customer relationship and high necessary capital investment, thus establishing obvious industry barriers. As a leading pioneer in the industry, Dalip leads the industry in R & D investment and professional ownership, customer recognition of "three barrels of oil" in downstream channels, and capital investment. At the same time, the company has the whole industry chain mode from the tube billet production of raw materials in the initial stage to the special seamless steel tube rolling, pipe end thickening, heat treatment and coupling in the middle stage, and finally to the high-end pipe processing of energy in the later stage. We believe that this model can optimize the overall production cost, improve business efficiency, ensure the quality control of products in the whole production process, and provide customers with cost-effective high-end products, so as to stabilize the company's own market competitive position.
The prosperity of the industry is high, and the production capacity expansion plan is carried out steadily to welcome the golden period of development. In response to the call of the state's policy of "increasing reserves and increasing production", Chinese oil and gas companies have vigorously stepped up exploration and development. Petrochina Company Limited's capital expenditure has been maintained at an average level of about 260 billion yuan in the past five years, of which the proportion of capital expenditure in the exploration and production sector has been maintained for a long time. As one of its important oil equipment suppliers, the company can fully enjoy the growth dividend of the industry. At present, the actual capacity utilization of the company's overall oil and gas pipes has exceeded 100%, is actively carrying out capacity expansion, the project will be completed and put into production in 2025, and the annual production capacity of the overall oil and gas pipes is expected to meet explosive growth.
There are broad prospects for going to sea, focusing on the growth of overseas markets. Benefiting from the company's precise strategic focus on overseas markets in 2022, overseas revenue increased 2.2 times year-on-year to RMB 1.15 billion. We are optimistic about the company's future penetration in the Middle East and North Africa. It is also expected that the share of overseas market revenue is expected to exceed 30% in the future.
Green intelligence helps the company's long-term healthy and sustainable development. The raw materials of the company's products are mainly scrap, and the recycling of waste materials as high energy-consuming products significantly reduces the intensity of carbon emissions. In addition, the company's emission standards meet the ultra-low emission standards of Hebei Province, and the production of hazardous wastes has also declined in 2022 compared with the same period last year. In terms of water and electricity consumption, the company continues to upgrade related equipment for energy saving and water saving, helping to promote long-term healthy and sustainable development.
Profit forecast and valuation
Value is both growing, giving a "highly recommended" rating for the first time. Reviewing the past record, the company has maintained a stable profit in its past performance (excluding the negative impact of the 2020 epidemic) and maintained a dividend ratio of more than 40% every year, considering that with the release of the second phase of capacity expansion in 2025, the performance explosion period is coming, and the company's value is growing at the same time.
We estimate that the company's income will increase to 4.29 billion / 4.36 billion / 7.09 billion yuan in 2023 / 2024 / 2025, and the homing net profit will increase to 200 million / 240 million / 670 million yuan in the same period. The corresponding homing net profit margin is 4.8%, 5.6% and 9.5%, respectively. The improvement of profitability benefits from the optimization of product structure and the increase of customized and high-end production. And the improvement of overall operating efficiency and other factors. To sum up, we give the company a target price of HK $4.70, which is equivalent to a price-to-earnings ratio of 31.6 times / 26.4 times / 9.6 times 23E/24E/25E. The target price is still 21.8% higher than the current price, covering the "highly recommended" rating for the first time.
Risk hint
Price fluctuation of raw material scrap metal; postponement or rescheduling of oil and gas exploration and production projects; influence of domestic and foreign macroeconomic fluctuations and changes in oil exploration demand; overseas expansion is less than expected