The company's recent situation

According to the company's announcement, JereHoil & Gas Engineering Corporation—Abu Dhabi (Abu Dhabi Branch), a wholly-owned subsidiary of Jerry Co., Ltd., recently received information from the owner Abu Dhabi Company for Onshore PetroleumOperations Ltd. (Abu Dhabi National Petroleum Company Onshore Company of the United Arab Emirates, “ADNOC Onshore” for short) Project award letter for the EPC project for the digital transformation of well sites in Bab, Bu Hasa, and South East blocks. The total amount of the award letter is estimated at 0.92 billion US dollars (approximately 6.555 billion yuan, excluding VAT).

reviews

Build smart oil fields and help the digital transformation of well sites. ADNOC Onshore is a holding subsidiary of Abu Dhabi National Petroleum Company in the United Arab Emirates. It has a long history and is rich in production. It operates an oil field with an area of about 0.012 million square kilometers and produces about 4 million barrels of crude oil per day. This cooperation between Jerry Co., Ltd. and ADNOC Onshore plans to upgrade existing wellhead facilities within three oil field blocks to achieve digital operation, covering various well types such as oil wells, water injection wells, WAG wells, and wastewater treatment wells. The total construction period of the project is expected to be 42 months. The total construction period of the project is expected to be carried out intelligent transformation and digital construction work on various old well sites, thereby improving oilfield production efficiency, production safety, and carrying out data links, data aggregation and analysis by increasing various intelligent equipment to achieve the transformation of the three oil fields from traditional manual inspection to unattended and digital well sites. Build smart oil fields.

Overseas business continues to expand: 1) North America: Electric driven fracturing equipment continues to break through, and the company is expected to fully benefit. According to the company's announcement, in July 2024, the company received a new order for electric fracturing equipment from an old North American customer, and is currently speeding up the construction of an R&D building at the Houston plant. 2) Middle East: Continuously receiving large orders. In September 2024, the company won the bid for the Bahrain National Petroleum Company gas project. The total amount of the contract including tax is about 2.2 billion yuan. All 27 compressor units in the project will be supplied by the company. In October 2024, the company officially signed a contract for the development of the Mansuriya gas field with the Central Iraqi Oil Company. Recently, it also won an EPC project for the digital transformation of ADNOC well sites in the UAE. We believe that the company is deeply involved in the high-end oil and gas market in the Middle East and is expected to achieve further breakthroughs in Middle Eastern orders.

Profit forecasting and valuation

We keep the company's 2024 profit forecast and 2025 profit forecast unchanged; the current stock price corresponds to the 2024/2025 price-earnings ratio of 13.8 times/12 times. We maintain our outperforming industry rating. Considering the upward shift in the industry valuation center, we raised our target price by 18.4% to 45.00 yuan, which corresponds to 17.0 times the 2024 price-earnings ratio and 14.9 times the 2025 price-earnings ratio. There is 23.6% upside compared to the current stock price.

risks

The expansion of business in the North American market fell short of expectations; the capital expenditure of domestic oil and gas companies fell short of expectations.