A leading company in the oil and gas sector, its performance continues to grow. The company is a leading domestic oilfield special equipment manufacturer and oilfield service provider. Its business scope covers high-end equipment manufacturing, oil and gas engineering, oil and gas field technical services, environmental management, and new energy, forming a diversified driven business model. Since 2016, global oil prices have risen from the bottom. The company has continued to benefit from the acceleration of domestic shale gas development and the expansion of overseas oil and gas capital expenditure. The performance has maintained an upward trend. The CAGR for revenue and net profit from 2019-2023 was 19.05% and 15.89%, respectively.

Global oil and gas spending remains high, and the overseas layout continues to be realized. The current oil price support level is expected to be 65-70 US dollars/barrel. Global upstream capital continues to increase. The company is expected to benefit from medium to high oil prices. At the same time, the impact of oil prices will gradually weaken, and performance stability will increase. 1) Domestic market: Net profit from three barrels of oil continues to grow, capital expenditure remains high. Unconventional oil and gas is gradually becoming the main force in increasing oil and gas storage and production in China, which is expected to continue to drive demand for fracturing equipment. The company has significant advantages in the domestic electric drive fracturing equipment field, and is expected to continue to benefit from the trend of electric drive penetration. 2) Overseas market: The overseas oil service market is 9 times the size of the domestic market. The company has a comprehensive layout in overseas markets such as Central Asia, the Middle East, North America, and South America. Among them, the KOC project in the Middle East market has set a benchmark and helped the company win big orders. It is expected that the Middle East oil and gas market will continue to benefit from increased market share to drive growth; the North American market is expected to benefit from the replacement of existing fracturing equipment, and the company's electric drive fracturing equipment is stronger than that of local manufacturers. It is expected that the North American market layout will continue to be deepened by the trend of electric drive substitution.

Siemens Energy is an authorized complete manufacturer, and the North American gas turbine space is vast. Since 2018, the company has continued to expand its gas turbine generator business, developing 6MW gas turbine generator sets and 35MW mobile gas turbine generator sets, and expanding power supply services and leasing business in 2024. We believe that the company's current gas turbine business mainly serves oil and gas field users, which is beneficial to the company's downstream customer development, especially in the more strategically significant North American market, and can form a unique competitive advantage. At the same time, the turbine products mainly used by 5-50MW gas turbines to power data centers are expected to create another growth pole for the company if it opens up the North American data center market in the future.

Profit forecast: Maintain the company's “gain” rating. We expect that in 2024-2026, the company will achieve operating income of 14.616/16.614/18.557 billion yuan and net profit to mother of 2.745/3.183/3.603 billion yuan. The corresponding PE is 14.11x/12.17x/10.75x, respectively.

Risk warning: Domestic and foreign macroeconomic fluctuations exceed expectations, oil and gas capital expenditure falls short of expectations, market competition intensifies, overseas policy risks, North American market development falls short of expectations, profit forecasts and valuation models fall short of expectations