Oil and gas equipment special parts supplier, the development of high value-added deep sea, fracturing equipment special parts company is the R & D, production and sales suppliers of oil and gas equipment special parts, the main products are: wellhead and oil production tree special parts, deep-sea equipment special parts, fracturing equipment special parts and drilling and production equipment special parts, the proportion of 2022H1 revenue is 46%, 30%, 19% and 3% respectively. In the future, the company will mainly develop special parts for deep-sea and fracturing equipment with high added value.

The oil service industry has warmed up and is optimistic about the fields of deep sea and unconventional gas.

The market scale of oil service equipment recovers periodically with the prosperity of the industry, and the upstream capital expenditure structure is tilted to deep-sea and onshore unconventional oil and gas. At present, the newly signed orders of overseas oil service companies are growing rapidly.

The economy of deep-sea projects has been improved driven by reduced costs and accelerated oil production time, providing solid support for ongoing development activities. Deep-sea equipment has high technical barriers and increasing market concentration, which is beneficial to the parts companies that have already entered the leading supply chain system of deep-sea oil service equipment.

Special parts for deep-sea equipment-- important growth pole

Competitive advantage in technology and equipment: the company's total forming capacity of forging equipment 350MN may be the first in the industry, mainly producing high-end forgings with complex structure (95% for marine equipment valve bodies), which can achieve one-time forming, improve the work efficiency of the extruder and the production rate of forgings, and increase the production capacity of 80,000 pieces.

Product upgrade: the company improves the industrial chain and increases surfacing and other processes. At the same time, the company realizes the transformation from "parts" to "components" of deep-sea products, grasps the trend of parts standardization, and co-produces Subsea 2.0 standards with Technip FMC to achieve continuous upgrading of deep-sea products.

Great potential for going out to sea: overseas oil service companies consider the cost side, and the basic processing capacity is transferred to Asia-Pacific and Latin America. With the help of cost advantage, equipment manufacturing capability advantage and industrial chain integration advantage, deep-sea equipment parts have great potential for export to overseas markets.

Special parts for fracturing equipment

From 2012 to 2020, China's shale gas production CAGR is as high as 130.67%. We expect that shale gas will become a new growth point in China's oil and gas industry in the future, and the demand for fracturing equipment may be enlarged. Chinese oil and gas equipment manufacturers continue to break through the fracturing market in North America and the Middle East, and the company may resonate with downstream customers to boost the demand for special parts for fracturing equipment.

Profit forecast and valuation: we predict that the company's return net profit from 2023 to 2025 will be 2.8 billion yuan. Comparable companies averaged 30 times PE in 2023. Dewey 350MN investment project put into production, the total forming capacity is either the first in the world, or break through the bottleneck of domestic forging production equipment. In 2023, Dewey will be given a target price of 36.3 yuan according to 35 times PE, and the first coverage will be given a "buy" rating.

Risk tips: 1) the risk that the new order is not as good as expected; 2) the risk that the price and gross profit margin of the newly signed order in the oil service industry are difficult to rise further; 3) the risk that the project is put into production or is not as expected.