Key points of investment

Offshore EPCI is the leader, and domestic and foreign revenue is growing steadily. The company is the only large-scale offshore oil and gas engineering general contracting company in China. The revenue in 23 years reached 30 billion yuan, marine engineering revenue was 22.6 billion yuan, yoy +10.8%, of which total contract revenue accounted for 85%, and non-marine engineering revenue was 8.1 billion yuan, yoy -9.1%.

-Domestic revenue: The company's domestic revenue in '23 was 24.7 billion yuan, domestic oil and gas business contract amount was 16.4 billion yuan, and 24Q1 domestic contract amount was 6.1 billion yuan. The company's domestic marine engineering revenue is highly correlated with the CNOOC development capital expenditure of its main owner. CNOOC plans to achieve an average annual net production increase of 6%-7% over 24-26, and its domestic capital expenditure is expected to remain high. The company's domestic non-offshore engineering revenue mainly comes from LNG receiving station projects. The workload has declined in 23 years. It is expected that 11 domestic receiving stations will be put into operation during the “15th Five-Year Plan” period, and the company still has the potential to accept subsequent orders.

-Overseas revenue: The company's overseas revenue in '23 was 6 billion yuan, the contract amount was 14.2 billion yuan, and the 24Q1 contract amount was 0.4 billion yuan. The company's overseas contract amount in '23 reached a record high, with about 12.7 billion from the three major turnkey projects in the Middle East. Future capital expenditure in the Middle East will guarantee the company's revenue from the offshore oil and gas business. Furthermore, the growth rate of LNG export terminals may slow down, and the FPSO business still has prospects. In the long run, the company set an output value target of 60 billion yuan by 2035, with domestic oil and gas, clean energy, and overseas businesses accounting for 1:1:1.

The oil service industry remains booming, and deep-sea development has become a priority. The recovery in oil prices since 2020 has driven a moderate increase in upstream capital expenditure of oil and gas companies in this round. We expect oil prices to remain medium to high in 24-25, and the upstream oil and gas capital expenditure is expected to remain high. At the same time, the development focus of structural oil and gas companies will shift towards the ocean, especially the deep sea. The capital expenditure of the global offshore oil and gas industry reached 116 billion US dollars in 23, and is expected to rise further to 125 billion US dollars this year. The average annual growth rate of offshore oil and gas exploration and development investment is expected to be 6.8%. The transfer will further benefit the marine oil service industry.

Overseas business is being transformed into a general contractor, and the scale advantage brings potential for growth. The company's new overseas orders of 14.1 billion were all obtained as an international general contractor in '23, achieving a transformation from an international engineering subcontractor to an international general contractor, and strengthening its competitive advantage overseas. The company has the world's leading land site area and fleet size. With the further increase in site area in the future, construction costs are expected to drop further and profit levels are expected to further increase.

Profit forecasting and valuation

As an EPCI leader in the domestic offshore industry, the company is expected to grow steadily in the next few years. At the same time, the transformation of overseas business to general contractor and scale advantage will bring about an increase in profitability. The company's net profit from 24-26 is 1.907, 2.336, 2.662 billion yuan, corresponding to EPS 0.43, 0.53, 0.60 yuan/share, corresponding to PE 12.6, 10.3, and 9.0 times. Refer to comparable companies, and give the company a “buy” ” Ratings.

Risk warning

Risk of oil price fluctuations, risk of fluctuations in LNG business volume, risk of asset impairment