The CNOOC project reduced costs and improved quality and efficiency, and the net interest rate continued to rise

2024H1's revenue reached 13.4 billion yuan, -7% year over year. The main reason was that new overseas projects were in the start-up phase; net profit to mother was 1.2 billion yuan, +21.7% year over year. Among them, Q2 revenue was 7.76 billion yuan, -3.6% year-on-year, net profit to mother was 0.72 billion yuan, +34.9% year-on-year, and net profit after deducting non-return to mother was 0.439 billion yuan, or -3.9% year-on-year.

Net interest rates continued to improve. The net interest rate for 2024Q2 companies was 9.59%, compared to only 7% in the same period in 2023. The net interest rate was +2.58pct year over year, and +1.09pct month-on-month. The main possibility is that the scale effect of the company's workload growth is obvious, cost reduction, quality improvement and efficiency, and the impact of consumption tax rebates.

The workload continues to increase, and the amount of steel processing for construction continues to increase

The completed steel processing volume was 0.2713 million structural tons, +16% compared to the same period last year. The company 2024H1 built 35 conduit racks on land (year-on-year +23), 11 conduit racks (year-on-year +6), 22 offshore conduit racks (year-on-year +15), and 9 conduit racks (year-on-year +5); however, in a single quarter, the Q2 land-based construction conduit racks were -3, and offshore conduit racks were +4 per annular and 3 conduit racks month-on-month.

Offshore operations such as installation were spent 0.0114 million per day, -12% over the same period. Of these, 2024H1 laid 168 km of submarine pipelines (-145 km year on year) and 42 km of submarine cables (36.6 km year on year).

The company focused on the overseas high-margin market, and the share of overseas oil and gas orders increased steadily. The company signed new contracts of 12.5 billion yuan in the first half of 2024, -30% year-on-year. It signed 7.5 billion new orders within China (-31% YoY) and 5 billion new overseas orders (-28% YoY). The overseas share reached 40%, an increase of 1.2 pct over last year. The total number of on-hand orders is approximately 38.8 billion yuan, providing strong support for the company's continuous business development.

The company expects no less than 10 billion new orders to be signed in overseas markets in 2024/2025. Furthermore, in order to accelerate the physical localization development of overseas companies, enhance overseas capital pool functions, and enhance overseas project bidding and operation guarantee capabilities, the company plans to increase its capital by 68 million US dollars to an international limited company, all demonstrating confidence in overseas market orders.

Profit forecast and investment rating: Maintain the 2024/2025/2026 net profit of 1.97/2.45/2.85 billion yuan, and the current stock price corresponds to PE 12.2/9.8/8.5 times, respectively. Maintain a “buy” rating.

Risk warning: the risk that CNOOC's capital expenditure falls short of expectations; the risk that the sharp drop in international oil prices affects the willingness of oil companies to spend capital; overseas order expansion or operation progress falls short of expectations.