Core views:

The company released an annual report for '23 and a quarterly report for '24, and the overall performance was in line with expectations. According to the company's annual report, in 2023, the company achieved revenue of 1.21 billion yuan, an increase of 23% over the previous year, and realized net profit of 142 million yuan, an increase of 17.3% over the previous year. In the first quarter of 2024, the company achieved revenue of 286 million yuan, an increase of 5.8% year on year, and realized net profit of 28 million yuan to mother, a year-on-year decrease of 7.4%.

The company continued to make breakthroughs in deep-sea special parts, and overseas business revenue grew rapidly. According to the company's annual report, the company continues to increase investment in product research and development and transformation into high-end product markets such as deep sea and fracturing, and the share of orders in the deep sea sector is increasing year by year. The scale of development of oil and gas, which is difficult to develop in the deep sea, and unconventional oil and gas continues to expand. The company achieved overseas revenue of 830 million yuan in 2023, an increase of 38% over the previous year; the gross margin of overseas business reached 26.5%, nearly 13 pcts higher than domestic sales. Overseas, the company has established long-term and stable strategic partnerships with large oil and gas technology service companies such as TechnipFMC, SLB, Aker Solutions, and Baker Hughes. It is the most important supplier of special components for these international companies in the Asia-Pacific region in the field of deep-sea equipment, and has a prominent position in the industry.

The boom in the industry continues, and new production capacity investment is about to climb. According to the company's annual report, the oil company will continue to increase its oil and gas development efforts, especially the development of ultra-deep water oil fields and unconventional oil and gas development. The global upstream exploration and development capital expenditure is estimated to be about US$607.9 billion, an increase of 5.7% over the previous year. The company's fund-raising project, the 350MN multi-directional die-forging hydraulic press, can be used to mold and manufacture key components of equipment under special operating conditions such as deep sea and fracturing. It is expected that gradual commissioning will drive the company's continued growth in the future.

Profit forecasting and investment advice. We expect the company's net profit to be 1.85/236/302 million yuan in 2024-2026, respectively, and the corresponding P/E is 16.7/13.1/10.3 times, respectively. Considering the clear boom in the industry and the company's production capacity is gradually on the right track, the company is in a stage of rapid growth in performance. We gave the company 25 x PE in 2024, corresponding to a reasonable value of 23.7 yuan/share. Maintain a “buy” rating.

Risk of falling oil and gas prices; risk of increased industry competition; risk of rising raw material costs, etc.