DEVELOP(SH:688377) HTSC·2025-04-28 05:30Investment Rating - The investment rating for the company is maintained as "Buy" with a target price of RMB 21.58 [7][8]. Core Views - The company reported a revenue of RMB 1.124 billion for 2024, a year-on-year decrease of 7.12%, and a net profit attributable to the parent company of RMB 0.856 billion, down 39.90% year-on-year. The first quarter of 2025 saw a revenue of RMB 0.271 billion, a decline of 5.36%, and a net profit of RMB 0.021 billion, down 25.40% year-on-year. The underperformance is attributed to slower growth in the oil and gas production system components business [1]. - The company is expected to benefit from the recovery in deep-sea product orders as the international oil price remains high, and upstream exploration and development investments are increasing. Global capital expenditure for offshore oil and gas projects is projected to exceed USD 100 billion in 2025, representing a year-on-year increase of over 20% [3]. - The company has been advancing its multi-directional forging project, which aims at high-end large valve localization, and is expected to enter a period of substantial returns following years of high capital expenditure [4]. Summary by Sections Financial Performance - The company's gross margin for 2024 was 18.80%, a decrease of 3.18 percentage points year-on-year, primarily due to delays in downstream oil and gas projects and a decline in deep-sea product sales proportion. However, there was a notable increase in orders for cladding and precision machining, which is expected to gradually improve profitability [2]. - The total operating revenue for 2025 is projected to be RMB 1.387 billion, with a year-on-year growth of 23.39%. The net profit attributable to the parent company is expected to be RMB 1.500 billion, reflecting a 75.17% increase compared to 2024 [6]. Market Outlook - The company is positioned as a key supplier of specialized components in the deep-sea equipment sector for major players like TechnipFMC, SLB, and Baker Hughes, which is expected to enhance its market share as the deep-sea sector experiences structural recovery [3]. - The company’s multi-directional forging products are anticipated to have high visibility in downstream demand, with potential markets in aviation and nuclear power being particularly promising [4]. Profitability and Valuation - The company has adjusted its net profit forecasts for 2025 and 2026 downwards by 14% and 2% respectively, now estimating RMB 1.500 billion and RMB 2.450 billion. The estimated net profit for 2027 is RMB 2.960 billion. The adjustments are due to anticipated increases in costs and expense ratios [5]. - The company is assigned a price-to-earnings (PE) ratio of 28 times for 2025, reflecting a premium valuation due to its leading global technology in manufacturing processes and equipment [5].