Key points of investment

Incident: On September 25, Jerry Oil & Gas Engineering Co., Ltd., a wholly-owned subsidiary of Jerry Group, and Bahrain National Petroleum Company BAPCO signed a general contract project for 7 gas booster stations.

This is the first large-scale oil and gas EPCC project since the establishment of diplomatic relations between China and Brazil, showing that Jerry International has recognized the Bahrain National Petroleum Company (BAPCO) as a key strategic project to meet growing gas demand. Once the tender for the project was opened, many international engineering giants competed on the same stage. As the only Chinese company that has passed BAPCO's strict qualification review, Jerry Oil & Gas Engineering Company stood out with its excellent performance in the Middle East market in recent years and excellent customer reviews. It won the bid for this EPCC engineering general contracting project, becoming the first Chinese company to successfully enter a large-scale EPCC project in the oil and gas sector in Bahrain since the establishment of diplomatic relations between China and Brazil 35 years ago.

Jerry designs and manufactures compressor units for the core equipment to help Bahrain clean energy supply. The EPCC project includes 6 pressurization stations and 1 central compression station, covering a full range of construction and services from overall project design, procurement, equipment supply, construction, commissioning and trial operation. The 27 compressor units in the project will all be designed, manufactured and supplied by Jerry, which fully demonstrates the high level of trust that international high-end oil companies have in Jerry's natural gas equipment manufacturing and project general contracting capabilities. The total construction period of the project is 34 months. After completion, it will be used as Bahrain's energy infrastructure, providing a total natural gas processing capacity of nearly 900 MMSCFD for industrial facilities such as Bahrain power plants, BAPCO refineries, and Bahrain's LNG. It will play an important role in the development and utilization of Bahrain's natural gas resources, guarantee supply, meet demand, and clean energy transformation.

The Middle East market is a key market for China's oil service overseas business, and Middle Eastern countries such as OPEC member countries are important strategic partners for win-win cooperation and lasting development. According to OPEC data, OPEC's crude oil exports to China reached 0.24 billion tons in 2023, accounting for 24.3% of its total exports and 42.3% of China's total crude oil imports. According to China's global investment & construction tracking data, China's investment projects for the oil and gas industry in six countries, including Saudi Arabia, Iraq, the United Arab Emirates, Kuwait, Qatar, and Angola, reached 24.25 billion US dollars from 2020 to June 2024. Since receiving a KOC order worth 2.7 billion yuan in 2021, Jerry has gradually improved the service team layout and customer development in the Middle East. The Mansuriya gas field project in Iraq in May 2024 and the current Bahrain gas project continue to demonstrate the overall strength of China's equipment and EPC services represented by Jerry.

Profit forecast and investment rating: The company is a high-quality target with low valuation and determined growth in the machinery sector. We maintain the company's 2024-2026 net profit forecast of 2.7/3.3/3.7 billion yuan. The current market value corresponds to a valuation of 11/9/8 times, maintaining a “buy” rating.

Risk warning: Fluctuations in international oil prices; domestic oil and gas capital expenditure falls short of expectations; frictions in international relations.