\u3000\u3000 China Oilfield Services Limited(601808) (601808)
\u3000\u30001. Company profile
China Oilfield Services Limited(601808) is the most complete and comprehensive offshore oilfield service company in Asia. The company’s business involves exploration, development and production. From the perspective of revenue structure, in 2020, the company’s operating revenue includes oilfield technical services, drilling services, ship services and geophysical services, accounting for 46%, 40%, 10% and 4% respectively. In terms of operation area, 74% and 26% of the company’s revenue are from China and abroad respectively.
\u3000\u30002. Industry analysis: strong growth in oil service demand and recovery of Marine Services
Two factors lead to the expected increase of oil and gas capital expenditure in 2022: 1) the increase of oil price is higher than expected; 2) Double carbon correction. Several giants plan to increase capital expenditure significantly in 2022. The capital increase of CNOOC in 2022 is expected to continue.
Since 2021, the prosperity of the international offshore drilling service market has recovered, the utilization rate has continued to rise, and the daily fee has not yet rebounded. An inflection point is expected in 2022.
\u3000\u30003. Drilling service sector of the company: high performance flexibility
In 2022, according to the company’s strategic guidelines and press conference materials, the utilization rate of self-propelled and semi submersible platforms is expected to reach about 87% and 76% respectively, exceeding the peak in 2019. The gross profit of the company’s drilling business segment is positively elastic to the utilization rate and daily fee. According to our calculation, assuming that the utilization rate increases by 10%, the corresponding gross profit margin increases by 3.4cpt; The daily fee increased by 10%, corresponding to a 6.7pct increase in gross profit margin.
\u3000\u30004. Technical service sector: independent substitution and continuous growth
The company attaches importance to independent research and development and domestic substitution of key technologies. From the operating income and gross profit margin of the company’s oilfield technical service sector in the past ten years, except for individual years, it shows an overall growth trend due to external factors such as oil price and capital expenditure. The company’s independent intellectual property rights of logging while drilling technology service capacity has been rapidly improved. In addition, the company expanded offshore wind power business and actively explored green and low-carbon transformation
\u3000\u30005. Profit forecast and valuation
In 2021, considering the impairment loss of 2.01 billion accrued by the company, combined with the performance forecast, the net profit attributable to the parent company is expected to be 400 million. In 2022 / 2023, the net profit attributable to the parent company is expected to be 3.67/5.29 billion. EPS in 2021, 2022 and 2023 were 0.08/0.77/1.11 yuan respectively. The current PE valuation is 187 / 20 / 14 times that of 21 / 22 / 23 years respectively. Considering the inflection point of global oil and gas capital expenditure in 2022, strong growth and strong recovery expectation of oil service market, the drilling service sector of the company is expected to show strong performance flexibility; Oilfield technical services benefit from technological breakthroughs and import substitution, and are expected to maintain good growth. Give 25 times PE in 2022, target price 17.5 yuan, and raise the rating to “buy”.
Risk warning: the risk that the oil price falls sharply and the average value in 2022 is lower than expected; The risk that international oil and gas capital expenditure is less than expected; The impact of carbon neutralization and acceleration on oil demand leads to the risk of long-term downward demand for oil services; The cost risk caused by the rapid rise in the cost of manpower and bulk raw materials.
