Yantai Jereh Oilfield Services Group Co.Ltd(002353) ( Yantai Jereh Oilfield Services Group Co.Ltd(002353) ) event: the company issued the annual report of 2021. In 2021, the revenue reached 8.776 billion yuan, a year-on-year increase of + 5.80%, in line with expectations; The net profit attributable to the parent company was 1.586 billion yuan, a year-on-year increase of – 6.17%, slightly lower than our previous expectation, mainly because the company accrued impairment losses of 170 million yuan in 2021.
Key investment points
The provision for impairment has temporarily put pressure on the performance, and the collection has shown an improvement trend
In Q4 alone, the company achieved a revenue of 3.248 billion yuan, a year-on-year increase of + 13.13%; The net profit attributable to the parent company was 440 million yuan, with a year-on-year increase of – 23.57%, which was mainly due to the company’s single Q4 withdrawal of assets and credit impairment losses totaling 79 million yuan, which put pressure on short-term performance. In 2021, the bad debt reserves of the company’s large impaired accounts receivable were withdrawn according to the book balance and proportion corresponding to the aging. From the aging structure, the subsequent impairment pressure has been greatly reduced. In 2021, the net operating cash flow of the company was 808 million yuan, with a year-on-year increase of 157%, of which the net operating cash flow of Q4 alone was 948 million yuan, and the payment collection has shown an improvement trend.
Fundamentals continue to improve and wait for the inflection point of performance growth
We believe that the provision for impairment loss is only a temporary impact, and the company’s fundamentals will continue to improve. In 2021, the company obtained a total of 14.791 billion yuan of orders, a year-on-year increase of 51.73%. At the end of the year, the stock orders were 8.86 billion yuan, and the revenue and accumulated orders reached a new high since listing. The orders of oil service companies generally lag behind the oil price. Under the background of high oil price in 2022, the orders of the company are expected to maintain rapid growth. The average confirmation cycle of the company’s equipment orders is about half a year. We expect to usher in an inflection point of performance growth from 2022.
Profitability is under short-term pressure, and the expansion of North American market is expected to rebuild Jerry
In 2021, the company’s comprehensive gross profit margin was 34.86%, with a year-on-year increase of -3.04pct; The net profit margin attributable to the parent company was 18.07%, with a year-on-year decrease of -2.30pct. The decline in gross profit margin was mainly affected by the high prices of bulk commodities, raw materials and international shipping. Under the background of rising oil prices in 2022, the company’s downstream customers’ profits have improved, which is expected to drive the repair of their own profitability.
In 2021, the company obtained the order of US $426 million for phase 5 project of northern Jurassic production facility in Kuwait, the order of two sets of turbine fracturing equipment and the order of the first 30MW generator set supporting electric drive fracturing and other equipment in the United States. The recovery of shale gas industry in North America and the upgrading of fracturing equipment have entered a period. The company’s Turbine fracturing equipment has global competitiveness. The rapid expansion of North American market is expected to rebuild Jerry.
Profit forecast and investment rating: there is no change in the fundamentals of the company. We maintain the forecast of net profit attributable to the parent company of RMB 2.5/3 billion from 2022 to 2023, and the expected net profit attributable to the parent company of RMB 3.5 billion in 2024. The current market value corresponds to 15.11/12.44/10.77 times of PE from 2022 to 2024, maintaining the “buy” rating.
Risk warning: oil and gas prices fluctuate sharply; Exchange rate fluctuation risk; The North American market expansion was less than expected.
