Core Viewpoint - The company reported lower-than-expected financial performance for 2024 and Q1 2025, primarily due to slower growth in the oil and gas production system components business, but anticipates potential market opportunities from upcoming projects [1][4]. Financial Performance - In 2024, the company achieved revenue of 1.124 billion yuan, a year-on-year decrease of 7.12%, and a net profit attributable to shareholders of 86 million yuan, down 39.90% year-on-year [1]. - For Q1 2025, revenue was 271 million yuan, a decline of 5.36% year-on-year, with a net profit of 21 million yuan, down 25.40% year-on-year [1]. - The annual report's performance was below expectations, with a forecasted net profit of 104 million yuan [1]. Profitability and Cost Structure - The gross margin for 2024 was 18.80%, a decrease of 3.18 percentage points, attributed to delays in downstream oil and gas projects and a decline in deep-sea product sales [2]. - In Q1 2025, the gross margin was 18.96%, showing a year-on-year decrease of 0.54 percentage points but an increase of 0.62 percentage points from the previous quarter [2]. - The total expense ratio for 2024 was 9.47%, an increase of 0.58 percentage points year-on-year, driven by higher management expenses due to the acquisition of a Singapore subsidiary [2]. Market Outlook and Opportunities - The offshore oil and gas exploration and development sector remains robust, with deep-sea product orders expected to rebound as international oil prices remain high [2]. - According to Clarkson's forecast, global capital expenditure for offshore oil and gas projects is expected to exceed 100 billion dollars in 2025, representing a year-on-year increase of over 20% [2]. - The company is a key supplier of specialized components in the deep-sea equipment sector for major players like TechnipFMC, SLB, and Baker Hughes, positioning it to benefit from the structural recovery in deep-sea markets [2]. Investment Projects and Future Growth - The company has been advancing its multi-directional forging project for over a decade, targeting the domestic replacement of high-end large valves, with leading global forging technology [3]. - The project is on schedule, having completed critical phases such as equipment installation and main equipment debugging, indicating a potential for substantial returns from high capital expenditures [3]. Profit Forecast and Valuation - The company has revised down its net profit forecasts for 2025 and 2026 by 14% and 2% respectively, estimating net profits of 150 million yuan and 245 million yuan [4]. - The estimated net profit for 2027 is projected to be 296 million yuan [4]. - The company is assigned a target price of 21.58 yuan for 2025, based on a price-to-earnings ratio of 28 times, reflecting a premium due to its leading technology in investment projects [4].

Investment 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].