Incident: On August 18, 2024, CNOOC released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 13.429 billion yuan, a year-on-year decrease of 7.01%, and realized net profit of 1.197 billion yuan, up 22% year on year; net profit after deduction was 0.839 billion yuan, up 7% year on year. Net cash flow from operating activities was 2.594 billion yuan, down 10.83% year on year; basic earnings per share were 0.27 yuan/share, up 23% year on year. The balance ratio was 40.82%, up 3 pcts from the full year of 2023.

In the second quarter of 2024, the company's revenue for a single quarter was 7.758 billion yuan, down 3.57% year on year, up 37% month on month; net profit for the single quarter was 0.722 billion yuan, up 35% year on year, up 52% month on month; net profit after deduction for the single quarter was 0.439 billion yuan, down 3.86% year on year.

Comment:

The net interest rate of 2024Q2 companies improved significantly year-on-year, mainly affected by consumption tax rebates.

2024Q2, the company's gross sales margin was 11.49%, +1.58pct month-on-month and -1.33pct year-on-year. The main reason for the year-on-year decline was the centralized delivery of overseas projects in the same period last year, and the newly contracted overseas projects in this phase are in the start-up phase. The company's net sales interest rate was 9.59%, +1.09pct month-on-month, and +2.58pct year-on-year. The main reason for the year-on-year increase was the increase in other revenue from consumption tax rebates and the return of credit impairment losses. Among them, 2024Q2 confirmed 0.233 billion yuan in corporate consumption tax rebates, and there were no such matters in the same period last year, mainly affected by the time and range of consumption tax refund reporting and confirmation; the main reason for the 2024Q2 company's credit impairment loss was 0.018 billion yuan, +0.099 billion yuan year on year, the main reason was The recovery of overdue receivables in the current year was due to the combined effects of impairment losses accrued during the same period of the previous year.

2024Q2, the company's profit continued to grow month-on-month, mainly affected by increased offshore installation workload. 2024Q2, the company operates 72 projects, with a steel processing capacity of 0.1353 million structural tons, +19.0% year over year and -0.5% month over month. 99.1 km of maritime piping was laid, +10.1% year over year and +43.8% month over month. Offshore operations took 0.0066 million days, -1.5% year-on-year, +37.5% month-on-month; 16 conduit racks and blocks were installed offshore, +60.0% year-on-year, and +6.7% month-on-month. At the same time, we believe that improving the efficiency of the use of the company's offshore vessels is conducive to further reducing costs. In the second half of 2024, the company plans to complete and put into operation 35 projects. The company expects the construction and processing capacity may exceed 0.14 million tons, and the investment of more than 0.015 million ships. The company's offshore installation workload will continue to increase in the second half of the year, which may facilitate the continuous improvement of the company's profit margin.

The signing of new overseas contracts by 2024Q2 is progressing steadily. 2024Q2, the pace of new orders signed by the company has slowed down. The total number of new orders signed was 6.001 billion yuan, -50%, and -7.92% month-on-month. Among them, domestic and overseas new orders were 1.433 and 4.568 billion yuan respectively, -75% and -27% year-on-year respectively, and -76.55% and +1022.36% month-on-month respectively. The company's overseas market development work is progressing steadily. Major new overseas projects include the Pohang Steel Phase IV development turnkey project, CNOOC North America's MSA EPC framework agreement, and Saudi Aramco's CRPO125/126 conduit frame transportation and installation project. As of the end of this reporting period, the total number of orders in hand was approximately 38.8 billion yuan, providing strong support for the continued development of the company's business.

The company's core competitiveness continues to improve, providing basic support for domestic deep-water project development and the company's acceptance of international orders. In the first half of 2024, the “Haiji 2” offshore installation, the number one deep-water conduit rack in Asia, was successfully completed. The “Sea-based” deep-water series products were upgraded, and the design and construction technology of all types of floating production oil storage and offloading devices achieved a high level of autonomy. It successfully built the first cylindrical FPSO “Anemone 1” in Asia. The construction cycle was shortened by nearly 50% compared to similar international products, further enhancing the company's industry voice in the field of high-end FPSO construction. It successfully completed the construction tasks of the first deep-water high-pressure gas field “Deep Sea 1” Phase II project in China, effectively helping to increase the peak annual output of the “Deep Sea 1” ultra-deep-water atmospheric field by 50%.

Profit forecast and investment rating: We predict that the company's net profit for 2024-2026 will be 22.58, 25.81, and 2,915 billion yuan, respectively, with year-on-year growth rates of 39.3%, 14.3%, and 13.0%, and EPS (diluted) of 0.51, 0.58 and 0.66 yuan/share, respectively. The PE corresponding to the closing price on August 16, 2024 will be 10.69, 9.35 and 8.28 times, respectively. We believe that in the future, the company is expected to benefit from CNOOC's high level of capital expenditure and continued recovery in industry sentiment. The company's performance may continue to grow in 2024-2026, maintaining a “buy” rating.

Risk factors: macroeconomic fluctuations and downside risks in oil prices; risk of demand recovery falling short of expectations; risk of upstream capital expenditure falling short of expectations; geopolitical risk; risk of exchange rate fluctuations.