\u3000\u3 Shengda Resources Co.Ltd(000603) 619 Zhongman Petroleum And Natural Gas Group Corp.Ltd(603619) )
Event: on April 21, 2022, the company issued its annual report for 2021. In 2021, the company achieved an operating revenue of 1.754 billion yuan, a year-on-year increase of 10.67%; The net profit attributable to the parent company and the net profit deducted from non attributable to the parent company were 66 million yuan and 63 million yuan respectively, both of which turned losses into profits.
The exploration business brings new growth points. It is expected to achieve an oil production of Shanghai Pudong Development Bank Co.Ltd(600000) tons in 2023. In October 2021, the company obtained the mining license of Wenbei block, with an annual oil production of 170000 tons, a revenue of 397 million yuan and a gross profit margin of 70.64%, which is the main driving force of performance growth. The future exploration and development business is expected to accelerate its growth, mainly due to: (1) rapid release of output: the annual production scale of Wen 7 block is 400000 tons after the formal production, the oil test and production test of Hong 11 block has been started, and the exploration process of hongqipo oilfield has been accelerated. The company’s oil production target is about 390000 tons and Shanghai Pudong Development Bank Co.Ltd(600000) tons from 2022 to 2023, so there is great room for output improvement; (2) Maintaining stability at high oil prices: according to the latest prediction of steo released by EIA in April, the average spot price of Brent crude oil in 2022 is $103 / barrel, an increase of 45% compared with the average oil price of $71 / barrel in 2021, and the oil price remains high.
The drilling engineering business resumed production, and the company successfully entered the high-end market in Saudi Arabia. Abroad, the company’s main market has resumed work and production, and has signed new contracts with well-known oil companies such as Schlumberger, BOC, BP and novatech. In 2021, the total number of newly signed overseas engineering orders was about 2.006 billion yuan, a year-on-year increase of 28.1%, significantly higher than 1.641 billion yuan in 2019; In addition, the company signed a project order of about 1.109 billion yuan in the Saudi market with Saudi Aramco, and successfully explored the overseas high-end market through the drilling qualification review of Koc in Kuwait. In China, 30 new drilling project orders were signed, with a contract amount of 257 million yuan, a year-on-year increase of 62.66%. With the rise of oil price and the gradual recovery of upstream capital expenditure, the drilling engineering performance is expected to continue to benefit from the addition of orders brought by new market development.
The “Trinity” enhances the synergy of the industrial chain and has obvious cost advantages. Exploration and development, oil service engineering and petroleum equipment manufacturing are all in the upstream of the petroleum industry chain. At present, the company has successfully realized the strategic transformation to a resource-based enterprise. The three businesses pull each other and form an internal cycle and coordinated development. The technical advantages accumulated by the company’s equipment and oil service experience for many years provide good leading conditions for exploration and development. In Wensu project, the company produces pumping units, oil storage tanks and oil pipelines with its own advantages, which strongly supports the development and construction of the oilfield. In 2021, the company’s cost per ton of crude oil was 776 yuan, which has a significant cost advantage compared with its peers.
Investment suggestion: under the background of high oil price, the company’s crude oil production accelerated, the performance turned loss into profit in 2021, the exploration business reached a high gross profit of more than 70%, the gross profit margin of drilling engineering and equipment recovered significantly, and the synergy of the three businesses was significant. We estimate that the net profit attributable to the parent company from 2022 to 2024 will be RMB 475 / 967 / 1317 million, the corresponding EPS will be RMB 1.19/2.42/3.29 respectively, and the corresponding PE on April 22, 2022 will be 14 times, 7 times and 5 times respectively. Maintain a “recommended” rating.
Risk warning: the risk of slow exploration and mining of new mines; The risk of falling oil prices; Overseas epidemics repeatedly affect the risk of overseas oilfield operations.
