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Offshore Oil Engineering:Decline in offshore business partly offset by overseas construction projects

发布时间:2016-08-22    研究机构:瑞银证券

H1net profit excluding one-offs fell rapidly

H1net profit was Rmb870m, or Rmb343m excluding one-offs. Meanwhile, EPSexcluding one-offs was Rmb0.08, down 74% YoY. The company revised its Q1earnings, with a nearly Rmb590m downward revision to the Rmb1,200m assetrevaluation gain stemming from the Zhuhai merger. The figure was previouslycalculated based on a 100% interest, but it can only be calculated based on the postmergerstake under the accounting rules.

Overseas construction business big contributor to Q2net profit of Rmb440m

Q2net profit excluding one-offs was Rmb440m, and annualized ROE was close to 7%,much better than COSL's results. The overseas construction business was a bigcontributor to net profit. The completion level of the Russian LNG project (total ordervalue: Rmb10bn) improved from 32% to 60% within half a year, so revenue from nonoffshoreengineering projects jumped 73%, offsetting the decline in domestic offshoreoilfield development-related businesses. However, higher gross margins on businessessuch as installation and lower oil/gas-related revenue drove the company's gross margindown 13ppts YoY to 20%.

Hopes for recovery in 2017despite less optimistic situation in H216

H1new contract value was Rmb3.7bn, flat YoY and close to 50% of our Rmb8bn ordervolume estimate for the full year. That said, the progress of overseas orders wasdisappointing; H2profit is under heavy pressure and is likely to fall YoY. In our view,CNOOC could increase capex YoY in 2017, allowing the domestic business to recoverin 2017, although the recovery could be slow given low crude prices.

Valuation: Maintain Neutral rating

We maintain our Neutral rating. Our price target is based on 19.5x 2017E PE. Webelieve the market has anticipated the overall net profit trend for 2016-17, with upsiderisks including crude prices' creep towards US$60/bbl and a much higher CNOOCcapex hike than expected.

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