Revenue increased in the first half of the year, and profit margins declined slightly

In the first half of 2023, Huayou Energy achieved revenue of 84 million yuan, an increase of 15.0% over the previous year; the net profit of Huimu was 0.1 million yuan, a year-on-year decrease of 5.1%. The company's EBITDA rate for the first half of 2023 was 16.2%, down 1.2 percentage points from the previous year; the net interest rate was 0.8%, down 0.3 percentage points from the previous year.

All three business segments achieved growth in revenue

In the first half of 2023, the company's completion service achieved revenue of 190 million yuan, an increase of 11.7% over the previous year; among them, revenue from the overseas completion sector increased sharply by 78.6% to 70 million yuan, mainly due to the increase in completion business in Turkmenistan and Indonesia. The drilling services sector achieved revenue of 240 million yuan, an increase of 33.3% over the previous year; among them, revenue from the overseas drilling sector increased sharply by 38.1% to 110 million yuan, thanks to an increase in the volume of drilling operations in Kazakhstan. Reservoir services achieved revenue of 320 million yuan, an increase of 9.2% over the previous year; among them, revenue from the overseas reservoir sector increased by 28.6% to 120 million yuan, mainly due to the increase in the Canadian pressure gauge business and the Kazakh compressor maintenance and dynamic monitoring business. Other revenue increased 3.6% year over year to 90 million yuan, mainly due to an increase in edible alcohol sales business for the Ghana project in Africa.

Accelerate the deployment of domestic oilfield services and continue to break through in overseas markets

Beginning in 2023, international crude oil prices had mixed ups and downs, but they still maintained a medium to high level of operation. The three major international oil service companies continued to resume exploration and development efforts, and net profit for the first half of the year increased sharply year-on-year. China's energy development is at a new stage of speeding up the planning and construction of a new energy system. Oil service companies are speeding up the layout of fields such as oilfield services and petroleum engineering, consolidating existing advantageous businesses, and actively exploring new business segments such as technical services, and are expected to continue to benefit in the future.

In terms of overseas markets, the company's overseas engineering projects are progressing steadily and continuously achieving new breakthroughs. In Central Asia, Kazakhstan continues to contribute output value and profit to the company, and is the overseas market that contributes the most to revenue. The overall business order scale in the Middle East region has been rising steadily, and the types of service business lines have covered various fields such as well construction, completion tools, oil testing, and cable operations. In the African region, the Ugandan Free Trade Bank has obtained a government license; the production capacity of Ghanaian alcohol factories has been further increased, the quality of alcohol has also improved markedly, and sales channels will be further expanded in the future.

Maintain a “buy” rating

Since costs such as technical service fees were higher than our expectations, we then lowered the company's net profit forecast for 23-25 by 39.1%/36.4%/33.7% to 0.3/0.4/60 million yuan, corresponding to 23-25 EPS of 0.02/0.02/0.03 yuan, respectively. The company has taken the initiative to develop new customers, improve refined management, increase efficiency and reduce costs. With the gradual recovery of domestic oil service prices, future performance is expected to recover further and maintain a “buy” rating.

Risk warning: oil price fluctuation risk, overseas market risk, exchange rate fluctuation risk