Description of the event

The company released its 2024 semi-annual performance report. 2024H1 achieved revenue of 4.957 billion yuan, a decrease of 8.54%; realized net profit attributable to mother of 1.088 billion yuan, an increase of 4.33%; and realized net profit deducted from non-mother of 0.919 billion yuan, a decrease of 9.63%.

Incident reviews

Revenue declined, mainly hampered by the oil and gas engineering services business. By industry, in the first half of the year, oil field services and equipment achieved revenue of 4.163 billion yuan, an increase of 0.01%; oil field engineering and equipment achieved revenue of 0.794 billion yuan, a decrease of 36.86%, mainly due to the execution of many orders in the oil and gas engineering service business during the same period last year, and new orders were mainly in the early stages of this year.

Gross margin increased slightly year-on-year, and expense ratios increased. 2024H1's gross margin increased by 0.15 pct to 35.83% year on year, with the gross margin of oil field services and equipment decreased by 1.25 pct to 37.05%; the gross margin of oil field engineering and equipment also increased by 2.46 pct to 29.47%. In terms of cost ratio, the 2024H1 company's cost ratio increased by 3.04 pct to 12.21% year on year, with sales expenses up 0.62 pct to 4.63% year on year; management expenses ratio increased 0.30 pct to 4.29% year over year; financial cost ratio increased 1.26 pct to -0.81% year on year; and R&D cost ratio increased 0.86 pct to 4.09% year over year.

Continuing to advance the global development strategy, overseas revenue accounts for more than 48%. The company increased the capital of its Middle Eastern subsidiary by 120 million US dollars to build a high-end oil and gas equipment manufacturing base integrating manufacturing, procurement, logistics and service. The base covers the Middle East, North Africa and Southeast Asia.

After the completion of this project, the company has built high-end equipment manufacturing bases in China, North America and the Middle East, which are important global oil and gas markets. At the same time, the company signed a preliminary development and production contract with the Central Iraqi Petroleum Company and other relevant partners for the Mansuriya project; successfully obtained orders for major natural gas projects from strategic customers in Central Asia; successfully completed the delivery and application of the first Chinese electric driven fracturing equipment in North America; and obtained new orders for electric driven fracturing equipment from customers in July. 2024H1 achieved revenue of 2.381 billion yuan in overseas markets, accounting for more than 48%, and new overseas orders increased rapidly over the same period last year.

Cash flow has clearly picked up, and new orders are growing faster. The net cash flow from 2024H1's operating activities was 1.061 billion yuan, an increase of 307.74% over the previous year. The main reason was the increase in settlement methods using notes due to various measures to increase collection efforts and increase the share of domestic suppliers. 2024H1, the company obtained new orders of 7.179 billion yuan, an increase of 18.92% over the same period last year. As of 2024/6/30, stock orders reached 9.191 billion yuan, and there are plenty of orders in hand.

Profit forecasting and valuation

The company's revenue for 2024-2026 is estimated to be 14.292, 16.959, 19.16 billion yuan, with year-on-year growth rates of 2.73%, 18.65%, and 12.98%; net profit to mother is 2.654, 3.207, and 3.596 billion yuan, with year-on-year growth rates of 8.14%, 20.84%, and 12.13%. The company's 2024-2026 performance corresponding PE was 10.21, 8.45, and 7.54 times, respectively, maintaining the “gain” rating.

Risk warning:

Risk of overseas market development falling short of expectations; risk of sales of electric driven fracturing equipment falling short of expectations; competition increases risk.