Description of the event

The company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 5 billion yuan, a year-on-year decrease of 8.5%; net profit to mother was 1.09 billion yuan, an increase of 4.3% over the previous year. In the second quarter of 2024, the company achieved operating income of 2.83 billion yuan, a year-on-year decrease of 10.0%; net profit to mother was 0.71 billion yuan, an increase of 3.1% year-on-year.

Incident comments

The order structure improved and gross margin increased slightly, and the fee rate during the period increased due to exchange. The gross margin for the first half of 2024 was 35.83%, up 0.15pct year on year. Mainly due to changes in overseas sales product structure, overseas market gross margin increased 1.25% year on year. The cost rate for the first half of 2024 was 12.2%, up 3.05 pct year on year. Among them, the financial expense ratio increased by 1.26 pct year on year, mainly due to the high exchange income generated by foreign currency monetary projects in the same period last year; the R&D cost rate increased by 0.87 pct year on year, mainly due to the increase in R&D investment in the current period. The company's net operating cash flow was 1.06 billion yuan, compared to -0.51 billion yuan in the same period last year. The significant improvement in cash flow was mainly due to the effective implementation of the company's two financial control actions.

Breakthroughs have been achieved in domestic and international development, and there are sufficient orders in hand. The company continued to make significant progress in domestic and foreign market development: 1) In June 2024, the company successfully won the bid for CNPC's 2024 centralized procurement and bidding project for electric fracturing equipment (volume); 2) In May 2024, the company and other relevant partners signed a preliminary development and production contract for the Mansouria project to jointly develop Iraq's second atmospheric field, the Mansouria gas field; 3) During the reporting period, the company successfully won a major natural gas project order from a strategic customer in Central Asia; 4) The company successfully completed the largest equipment order in North America; 4) The company successfully completed the first largest equipment order in North America; 4) The company successfully completed the first largest equipment order in North America; 4) The company successfully completed the first largest equipment order in North America; 4) The company successfully completed the first largest equipment order in North America; 4) The company successfully completed the first largest equipment order in North America; 4) The company successfully completed the first largest equipment order in North America; 4) The company successfully completed the first largest equipment order in North America; 4) China's electric drive fracturing equipment was delivered and used in well fields. In July, it was once again favored by old customers and received new orders for electric driven fracturing equipment from customers. In the first half of the year, the company obtained new orders of 7.179 billion yuan, an increase of 18.92% over the same period last year. Stock orders at the end of the reporting period were 9.191 billion yuan. Adequate on-hand orders play a positive role in supporting future business performance.

Increased storage and production will accelerate in the 14th Five-Year Plan, demand for unconventional oil and gas extraction will continue to increase, and the company will fully benefit as a leader in fracturing equipment. The “14th Five-Year Plan” stipulates, “Strengthen domestic oil and gas exploration and development efforts, insist on putting equal emphasis on land and sea, actively expand exploration and development of unconventional resources, and accelerate the development of shale oil, shale gas, and coalbed methane.” By 2030, China's crude oil production is expected to maintain 0.2 billion tons, natural gas production will increase steadily, and the related oilfield service market will continue to grow. Looking forward to the future, along with increased storage and production and continued growth in oil and gas capital expenditure, the increase in unconventional oil and gas production will make the fracturing equipment industry a blue ocean market. As a leading domestic fracturing equipment leader, Jerry Co., Ltd. will fully benefit.

The share buyback and employee stock ownership plans are progressing steadily, demonstrating the company's full confidence. In January 2024, the company reviewed and passed the “Proposal on the 2024 Share Repurchase Plan”. The actual repurchase period was from February 23, 2024 to June 19, 2024. The company used centralized bidding transactions to accumulate 5,873,600 shares, accounting for 0.57% of the company's total share capital. The average transaction price was 30.86 yuan/share, and the total payment amount was 181,269,483.44 yuan (not including transaction fees). In April 2024, the company announced the “Business Partner Phase 4 Employee Stock Ownership Plan”. The total capital is no more than 45 million yuan. The share source is the company's share repurchase in the previous period, accounting for about 0.15% of the company's total share capital. Buybacks and employee shareholding demonstrate the company's full confidence.

Without considering future changes in share capital, the company's 2024-2026 EPS is expected to be 2.65 yuan, 3.16 yuan, and 3.64 yuan. The PE corresponding to the closing price on August 29, 2024 is 10.4X, 8.7X, and 7.6X, respectively, maintaining a “buy” rating.

Risk warning

1. The sharp drop in international oil prices;

2. Part of the company's industrial transformation failed.