Event: On August 29, 2024, the company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 1.918 billion yuan, an increase of 3.43% year on year; achieved net profit of 0.428 billion yuan, an increase of 1.02% year on year; realized net profit after deducting non-return to mother 0.418 billion yuan, a slight decrease of 0.19% year on year.

Net profit to mother increased significantly in 24Q2 compared to the same period last year. In 24Q2, the company achieved operating income of 1.111 billion yuan, up 16.93% year on year and 37.59% month on month; achieved net profit of 0.256 billion yuan, up 22.48% year on year and 48.61% month on month; realized net profit deducted from mother 0.248 billion yuan, up 23.02% year on year and 45.79% month on month.

Crude oil production continues to grow, and the share of exploration and development revenue is increasing. 24H1, the company produced 0.405 million tons of crude oil, an increase of 30.31% year-on-year. Among them, the Wensu block produced 0.3163 million tons of oil, up 14.98% year on year; the Tenge block produced 0.0887 million tons of oil, up 148.46% year on year. Against the backdrop of a rapid increase in production, the company's 24H1 exploration and development business achieved revenue of 1.119 billion yuan, an increase of 17.91% over the previous year, accounting for 58.34% of revenue, an increase of 7.16 pcts over the previous year.

The construction of oil and gas production capacity has been continuously optimized, and the international layout is advancing at an accelerated pace. On the one hand, the company continued to deepen geological research, and the reporting of reserves in the Kekeya Oilfield progressed steadily. At the same time, as the company discovered high-yield gas reservoirs and the gradual increase in associated gas production, the company also further laid out plans for natural gas treatment stations and gas pipelines in the first half of the year. On a quarterly basis, the 24Q1 Wensu/Tenge block production was 624.33 and 16.293,200 cubic meters. The 24Q2 output was 762.11 and 19.968 million cubic meters respectively, up 22.07% from month to month. 17.21% On the other hand, through international acquisitions, the company's international layout has begun to take shape. In the first half of the year, Kazakhstan's coastal project completed the extension of old mining rights and completed research plans for oil field construction methods, ground transportation, and base construction. Furthermore, the company actively participated in oil and gas block bidding in the international market. After obtaining oil and gas field development qualifications in Iraq, the company quickly won the bid for the development rights of Iraq's EBN and MF oil and gas blocks.

The increase in the chairman's holdings shows confidence, and the mid-term dividend focuses on shareholder returns. In July 2024, the company announced that Chairman Li Chundi or the company under his control would increase their holdings of the company within 12 months, with an increase of no less than 0.05 billion yuan and no more than 0.1 billion yuan. Based on the closing price on August 29, 2024, the number of additional shares held was between 251 and 5.01 million shares. Currently, the chairman indirectly holds 5.04 million shares of the company through shareholding in Zhongman Holdings, accounting for about 1.09% of the company's total share capital. Therefore, the chairman's shareholding ratio will reach 49.74% to 99.48% of his own shares. In addition, the company focuses on shareholder returns and plans to distribute an interim cash dividend of 0.197 billion yuan (tax included), or 0.43 yuan per share, with a dividend rate of 45.98%.

Investment advice: Global crude oil capital expenditure is insufficient, supply and demand are compounded by low inventories, oil prices are expected to remain stable and high, and the company's output is expected to have high growth potential and integrated cost advantages. We expect the company's net profit to be 1.078/1.335/1.647 billion yuan respectively from 2024 to 2026, and EPS corresponding to the current share capital is 2.33/2.89/3.56 yuan, respectively. PE corresponding to the closing price on August 29, 2024 is 9/7/6 times, maintaining the “recommended” rating.

Risk warning: the risk of a sharp drop in oil prices; the risk of the exploration process falling short of expectations; the risk of overseas oil field operations falling short of expectations.