\u3000\u3 China Vanke Co.Ltd(000002) 353 Yantai Jereh Oilfield Services Group Co.Ltd(002353) )
Investment logic
2022 is expected to be a big year for capital expenditure of oil companies and the prosperity of the industry is improved: international oil and gas prices have gradually rebounded since 2020h2. At present, most oil companies plan to increase capital expenditure in 2022. According to ihsmarkit, the total amount of global upstream exploration and development capital expenditure in 2022 will increase by 24% year-on-year. Sinopec’s capital expenditure plan predicts that exploration and development capital expenditure in 2022 will increase by about 20% year-on-year, The increase of capital expenditure of oil companies will significantly improve the prosperity of oil service industry. The newly signed orders of the company in 2021 were 14.794 billion yuan, with a year-on-year increase of 51.73%, and the stock orders at the end of the year were 8.86 billion yuan (including tax), with a year-on-year increase of 91.2%. Under the background of the improvement of the prosperity of the oil service industry, the company is expected to achieve good performance in 2022.
China’s unconventional oil and gas exploitation is expected to accelerate, resulting in an increase in the demand for fracturing vehicles during the 14th Five Year Plan Period: we expect the shale gas production to reach 52 billion cubic meters in 2025 and cagr22.5 billion cubic meters from 2021 to 202562%. Shale gas exploitation will bring a market demand of 5.7 billion yuan for fracturing vehicles in 2025. The total demand during the “14th five year plan” period will be 18.65 billion yuan, an increase of 103% compared with the demand during the “13th five year plan” period. It is estimated that the output of shale oil will reach 7 million tons in 2025, with a CAGR of about 30% from 2021 to 2025. The exploitation of shale oil is expected to bring a market demand of 3.5 billion yuan for fracturing vehicles in 2025.
North America is the world’s largest fracturing equipment market and is expected to contribute a huge growth increment to the company. North America is the world’s largest unconventional oil and gas market. According to our calculation, the stock of fracturing equipment exceeds 10000. The number of active drilling rigs and active fracturing fleets in the United States continues to increase since 2020h2. We assume that driven by high climate, 30% of the equipment needs to be replaced in the next three years, so the average annual market space in the North America is 16 billion yuan. At present, the company has obtained orders for turbine fracturing equipment and electric drive supporting generator sets in the North American market. In March 2022, the company passed the review of non-public offering. It plans to issue no more than 100 million shares and raise no more than 2.5 billion yuan. It will invest in the first phase of digital transformation project and the industrialization project of new energy intelligent fracturing equipment and core components. The development of new energy fracturing equipment in the North American market is expected to accelerate.
Profit forecast and investment suggestions
It is estimated that the company will realize the net profit attributable to the parent company of RMB 2.023/27.03/3.512 billion respectively from 2022 to 2024, corresponding to the current pe15x / 11x / 9x. Considering that 2022 is expected to be the year of capital expenditure of oil companies, the company, as the leader of oil service equipment, will fully benefit. With the large-scale development of shale oil and gas in China and the expansion of overseas markets, the performance is expected to achieve high growth. The company is given a target price of 52.81 yuan in the next 6-12 months, corresponding to pe25x in 2022. The company is given a “buy” rating for the first time.
Risk
Oil prices fell sharply, the progress of unconventional oil and gas exploitation was lower than expected, the development of overseas markets was blocked, and the risk of exchange rate fluctuations.
