Incident: The company disclosed a voluntary announcement regarding the receipt of a project award letter by its wholly-owned subsidiary.

Key points of investment

A landmark project for the 40th anniversary of the establishment of diplomatic relations between China and Argentina was awarded. The estimated amount of the project reached 6.6 billion yuan. On November 5, the company received an award letter from ADNOC for the EPC project for the digital transformation of well sites in three oil field blocks in the UAE. The estimated total amount of the project reached RMB 6.555 billion (0.92 billion US dollars).

The project involves more than 2,000 oil and gas production wellhead facilities and more than 40 different types of well sites. It is ADNOC's largest oil and gas well digital upgrade project to date. The official award of the EPC project not only highlights Jerry's leading position in the digital wave of the global oil and gas market, but also becomes an important milestone in deepening cooperation between the two countries under the “Belt and Road” initiative on the 40th anniversary of the establishment of diplomatic relations between China and the UAE.

The digitization and unmanned transformation of old well sites is expected to have a long-term demonstration effect ADNOC plans to upgrade existing wellhead facilities and achieve digital operation within the Bab, Bu Hasa, and South East oilfield blocks. By installing various intelligent equipment on old well sites to connect, summarize and analyze data, the oil field can transform from traditional manual patrolling to unattended, digital well sites. The award letter for this project is a framework agreement. The project execution method is a combination of a fixed amount order and an on-demand delivery order. The specific order situation and final settlement amount will be determined according to the actual work volume. Jerry's current engineering technology and construction experience fully met the implementation needs of this project. Subsequent signing of a formal contract and smooth execution of the project is expected to form a demonstration effect and further enhance market recognition to obtain more digital transformation projects.

Using the logic of EPC general contractors going overseas, Jerry's Middle East market layout entered the harvest period. After successfully completing the KOC 2.7 billion yuan project completion and acceptance in 2023, the company successfully gained brand awareness in the Middle East region, and 2024 ushered in a large-scale EPC contract harvest period. ① In May, Jerry and Central Iraq Oil Company signed a preliminary contract for the development of the Mansuria gas field (signed a formal contract in October, with an investment of 0.6 billion US dollars for the first phase and 0.4 billion US dollars for the second phase); ② In September, Jerry and Bahrain National Petroleum Company signed a general contracting project contract for 7 gas booster station projects (total amount 2.2 billion yuan, core equipment about 1.1 billion yuan). ③ In November, Jerry received an award letter for the EPC project for the digital transformation of ADNOC well sites in the UAE (estimated amount of 6.6 billion yuan). Large-scale EPC projects in the Middle East high-end oil service market continue to win bids, demonstrating the high trust of international high-end oil companies in Jerry's equipment manufacturing and project general contracting capabilities. As orders for overseas equipment and EPC services continue to be fulfilled, the company's overall gross margin and net margin will continue to increase.

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 14/11/10 times, maintaining a “buy” rating.

Risk warning: international oil price fluctuations, oil and gas capital expenditure falling short of expectations, frictions in international relations, etc.