1Q24 results are in line with our expectations
The company announced 1Q24 results: operating income of 9.21 billion yuan, -3% year on year; net profit of 50 billion yuan, +21% year over year, mainly due to 1) benefiting from increased storage and production, the company's technical service workload increased; 2) significant cost reduction and efficiency; 3) 2H23 Lufeng 12-3 FPSO put into operation increased profits. The 1Q24 results were largely in line with our expectations.
Cash flow from operating activities in 1Q24 was -162% to -1.05 billion yuan, mainly because the company's centralized repayment was better at the end of 2023, and there was a phased payment time difference.
Development trends
Offshore oil production increased in 2024-26, increasing the recovery rate, and steady growth in logistics services. CNOOC is leading a compound growth rate of 7% in 2023-26, and we judge that it will continue to drive a steady increase in the company's workload as a service production type. Furthermore, we believe that the company is gradually increasing its recovery rate business, and that projects such as the “Offshore Oil 162” mobile heating transformation are expected to be implemented during the year.
In 2024, LNG transportation capacity will enter the launch period. The company's wholly-owned subsidiary CNOOC Development Hong Kong Investment Company (holding 45% of the shares) and CNOOC Gas & Electricity and other companies jointly invested in the establishment of six single-ship companies to build 6 174,000 square meter LNG carriers. The company expects to deliver them one after another from October 2024 to September 2026.
We expect this to provide the company with continued profit growth.
Operating cash flow can still support the company's operations well. The company's cash flow from 1Q24 operating activities was -1.05 billion yuan, -162% year-on-year, mainly due to differences in phased payment and payment times. We believe that the company can use more than 10 billion yuan of capital and can still effectively support the company's production and operation, capital expenditure and dividend expenses.
Profit forecasting and valuation
The profit forecast for 2024/25 remains unchanged, and the target price of 4.5 yuan remains unchanged, corresponding to 13.5/12.3 times the 2024/2025 price-earnings ratio, and there is 5% room for growth. Maintain an outperforming industry rating. The current share price is trading at 12.9/11.7 times the 2024/2025 price-earnings ratio.
risks
Gross margins are under pressure, and overseas business is at risk.