Summary of CNOOC Engineering Q3 2025 Earnings Call Company Overview - **Company**: CNOOC Engineering - **Report Date**: October 25, 2025 - **Period Covered**: First three quarters of 2025 Key Financial Metrics - **Net Profit**: Decreased by 8.01% to 1.605 billion RMB [2][1] - **Revenue**: Decreased by 13.54% to 17.661 billion RMB [2][1] - **Market Contracting Amount**: Increased by 124.85% to 37.24 billion RMB [2][1] - **Overseas Business Revenue**: Reached a historical high of 29.336 billion RMB [2][1] - **Total Backlog**: Approximately 59.5 billion RMB [2][1] Operational Highlights - **Projects Executed**: 75 large-scale projects, with 22 completed [4][1] - **Construction Achievements**: - 21 land-based jackets and 14 modules constructed - 23 offshore jackets and 16 modules installed - Laid 273 km of subsea pipelines and 167 km of subsea cables [4][1] - **Steel Processing Completion**: 27.7% of planned volume [4][1] - **Offshore Investment**: Decreased by 12.32% [4][1] Order Conversion and Revenue Outlook - **Order Conversion Cycle**: - Domestic projects: 1-2 years - International projects: 2-3 years or longer - New BH project expected to take 5-6 years for revenue recognition [5][1] - **Profitability of Overseas Projects**: - 2024 overseas gross margin: approximately 9%, lower than domestic levels - Slight improvement in 2025 [5][1] Research and Development - **R&D Investment**: Increased significantly compared to the previous year, focusing on apparel and underwater industries [3][1][8][1] - **New Product Development**: - Deepwater trees in R&D phase, expected results in H1 2026 - Nearshore trees awaiting mass production orders [7][1] Cash Flow and Payment Terms - **Cash Flow Management**: - Longer payment cycles for overseas projects (approximately 45 days) compared to domestic (30 days) - Prepayment ratios: 10% for general contracts, up to 20-30% for some overseas projects [9][1] Dividend Policy - **Dividend Strategy**: - Cash dividends prioritized, with a minimum payout ratio of 30% set for 2024-2026 - 2024 actual payout ratio reached 41% [10][1][11][1] Future Outlook - **Short-term Expectations**: Anticipated revenue growth in Q4 due to project deliveries, despite some delays in Q3 [12][1] - **Long-term Goals**: Aim for 30-60 billion RMB revenue with a 7% compound growth rate, targeting a total of 60 billion RMB by 2035 [12][1] Conclusion CNOOC Engineering is navigating a challenging environment with a focus on improving operational efficiency and expanding its overseas presence. The company remains optimistic about future growth driven by a robust project pipeline and strategic investments in R&D.

Core Insights - The report highlights the development of emerging industries such as low-altitude economy and embodied intelligence as part of China's 15th Five-Year Plan [1][2] - It emphasizes the importance of deep-sea technology as a new productive force and the potential for domestic equipment to replace imported deep-sea equipment [2] - The report identifies key beneficiaries in the deep-sea equipment manufacturing sector and the humanoid robot market, as well as the increasing penetration of five-axis CNC machine tools [2][4][6] Emerging Industries - The focus is on cultivating new industry clusters, particularly in low-altitude economy and embodied intelligence [1][2] - The report suggests that deep-sea technology will play a crucial role in energy security and that capital expenditure in energy exploration is expected to remain strong [2] Deep-Sea Equipment - The report notes that deep-sea equipment manufacturing has high barriers to entry due to environmental pressures and that foreign companies currently dominate the market [2] - It mentions that China's deep-water oil tree localization rate is below 30%, indicating significant room for domestic production [2] - Recommended stocks include Hailanxin (300065), Zhongke Haixun (300810), and Kangst (300445) [2] Low-Altitude Economy - eVTOL (electric vertical takeoff and landing aircraft) is projected to become a major transportation tool by 2035, with an expected market size of 570 billion yuan [3] - The report anticipates a compound annual growth rate of 69.69% in eVTOL deliveries from 2023 to 2035 [3] - Beneficiaries in this sector include Dongmu Co. (600114), Xinzhi Group (002664), Tianc Control (603085), and Andavil (300719) [3] Humanoid Robots - Humanoid robots are expected to address customization challenges in industrial production, enhancing flexibility and interactivity [4][5] - Key components for humanoid robots include sensors, motors, lead screws, and reducers, with significant market potential for domestic replacements [5] - Recommended stocks in this area include Shuanghuan Transmission (002472), Green's Harmonic (688017), and Hengli Hydraulic (601100) [5] CNC Machine Tools - The report indicates that the penetration rate of five-axis CNC machine tools is expected to increase due to demand-side upgrades and the maturation of local supply chains [6] - It highlights that domestic manufacturers with independent R&D capabilities are likely to gain market share [6] - Beneficiaries include Kede CNC (688305), Haitian Precision (601882), and Huazhong CNC (300161) [6]

Investment Rating - The mechanical industry is rated as "Positive" [1] Core Insights - The report emphasizes the potential of high-end equipment in the mechanical industry, particularly in deep-sea technology and low-altitude economy, driven by national strategies and emerging industries [2][3] - The domestic market for deep-sea equipment has significant room for domestic substitution, with current localization rates below 30% for critical components [2] - The eVTOL market is projected to grow significantly, with an expected delivery of 300,000 units by 2035, leading to a market size of 570 billion yuan [3] - Humanoid robots are positioned to address customization challenges in industrial production, with key components like sensors and motors offering substantial market opportunities [4] - The penetration rate of five-axis CNC machine tools is expected to increase, driven by demand upgrades and local supply chain maturity [5][8] Summary by Sections Deep-Sea Equipment - The report highlights the strong growth potential in deep-sea equipment manufacturing, with significant barriers to entry and a high degree of market share held by foreign companies [2] - Key beneficiaries include companies like Hailanxin (300065), Zhongke Haixun (300810), and Kangst (300445) [2] Low-Altitude Economy - eVTOLs are anticipated to become a major transportation mode by 2035, with a compound annual growth rate of 69.69% in deliveries and 60.58% in market size from 2023 to 2035 [3] - Beneficiaries in this sector include Dongmu Co. (600114), Xinzhi Group (002664), and Tianc Control (603085) [3] Humanoid Robots - Humanoid robots are expected to revolutionize customization in manufacturing, with significant market potential for core components like sensors and motors [4] - Companies such as Shuanghuan Transmission (002472), Lide Harmonic (688017), and Zhongdali De (002896) are identified as potential beneficiaries [4] CNC Machine Tools - The report notes that five-axis CNC machine tools are gaining traction, with a shift from two- and three-axis machines in the domestic market [5][8] - Key players include Kede CNC (688305), Haitai Precision (601882), and Niuwai CNC (688697) [8]

Investment Rating - The report maintains a "Positive" investment rating for the machinery industry [1] Core Insights - The machinery sector underperformed in 2024 with a 5.04% increase in the Shenwan Machinery Equipment Index, lagging behind the Shanghai Composite Index by 7.63 percentage points and the Shenzhen Component Index by 4.3 percentage points. However, from the beginning of 2025, the index has risen by 10.44%, outperforming both major indices [2][17] - In 2024, the machinery industry's operating revenue reached CNY 19,995.67 billion, a year-on-year increase of 6.55%, while the net profit attributable to the parent company decreased by 3.28% to CNY 863.64 billion. In Q1 2025, operating revenue grew by 11.23% to CNY 4,540.09 billion, but net profit saw a significant decline of 30.03% [2][20][24] Summary by Sections Investment Summary - The machinery sector's performance in 2024 was below expectations, but it has shown strong recovery in 2025, leading the market [2][17] - The report suggests focusing on more proactive fiscal policies and new quality productivity for future investments [4][41] Sector Performance - The internal segmentation of the machinery industry shows significant disparities, with semiconductor equipment and motorcycle segments leading in revenue growth [3][35] - In Q1 2025, the highest revenue growth was observed in semiconductor equipment (33.38%) and motorcycles (30.74%) [37] Policy Recommendations - The report emphasizes the importance of proactive fiscal policies to boost engineering machinery sales, with significant government bond issuance planned [5][44] - It highlights the focus on new quality productivity, particularly in low-altitude economy, deep-sea technology, humanoid robots, and industrial mother machines [6][49] Emerging Opportunities - The low-altitude economy is expected to benefit from government support, with projections indicating substantial growth in drone deliveries and eVTOL markets by 2035 [7][50] - Deep-sea technology is crucial for energy security, with significant potential for domestic equipment replacement in deep-water oil and gas extraction [8][52] - Humanoid robots are positioned to address customization challenges in manufacturing, supported by government initiatives to expand application scenarios [9][53] - Industrial mother machines are essential for cost reduction in mass production, with a growing market for core components [10][54]

Investment Rating - The report maintains a "Positive" investment rating for the machinery industry [1] Core Insights - The machinery sector underperformed in 2024 with a 5.04% increase in the Shenwan Machinery Equipment Index, lagging behind the Shanghai Composite Index by 7.63 percentage points and the Shenzhen Component Index by 4.3 percentage points. However, from the beginning of 2025, the index has risen by 10.44%, outperforming both major indices [2][17] - In 2024, the machinery industry's operating revenue reached CNY 19,995.67 billion, a year-on-year increase of 6.55%, while the net profit attributable to the parent company decreased by 3.28% to CNY 863.64 billion. In Q1 2025, operating revenue grew by 11.23% to CNY 4,540.09 billion, but net profit saw a significant decline of 30.03% [2][20][26] Summary by Sections Investment Summary - The machinery sector's performance in 2024 was below expectations, but it has shown strong recovery in 2025, leading the market [2][17] - The report suggests focusing on more proactive fiscal policies and new quality productivity to drive growth [4][41] Sector Performance - The internal segmentation of the machinery industry shows significant disparities, with semiconductor equipment (39.08%), photovoltaic processing equipment (29.60%), and motorcycles (17.85%) leading in revenue growth for 2024. In Q1 2025, semiconductor equipment (33.38%) and motorcycles (30.74%) continued to show strong growth [3][39] - The report highlights that the machinery sector's public fund allocation increased from 2.79% in 2024 to 3.27% in Q1 2025 [30] Policy Recommendations - The report emphasizes the importance of proactive fiscal policies to boost engineering machinery sales, with significant government bond issuance planned for infrastructure projects [5][44] - It also suggests continuous attention to new quality productivity sectors, including low-altitude economy, deep-sea technology, humanoid robots, and industrial mother machines [6][49] Emerging Opportunities - The low-altitude economy is expected to benefit from government support, with projections indicating substantial growth in drone deliveries and eVTOL aircraft by 2035 [7][50] - Deep-sea technology is crucial for energy security, with significant potential for domestic equipment replacement in deep-water oil and gas extraction [8][52] - Humanoid robots are positioned to address customization challenges in manufacturing, supported by government initiatives to expand application scenarios [9][53] - Industrial mother machines are identified as essential for reducing costs in mass production, with a growing market for core components [10][54]