Dilate! The "lighthouse factory" promotes the internationalization of fracturing equipment

On April 13, Sany International (00631. HK) announced that it has entered into an agreement with the vendor, Sany Perpetual Enterprise Holdings Company Limited, for the company to acquire Sany Petroleum Technology for 2.98 billion yuan. Upon completion of the acquisition, Sany Petroleum Technology will become a wholly-owned subsidiary of Sany International.

Wayne FUNG, an analyst at CMB International, believes that oil field spending is expected to increase amid tight oil supply and energy security considerations in different countries. Sany International's acquisition marks an expansion into the oil and gas fracturing equipment segment.

It is worth noting that Sany Petroleum Technology has reached orders with local customers in Central Asia, Japan, the Middle East, Africa, Latin America and other countries and regions. In 2022, Sany International's overseas sales revenue will increase by 101.5% year-on-year, and the internationalization strategy is expected to be further deepened.

At present, relevant policies support the intensification of domestic oil and gas exploration and development, and in the context of "stabilizing oil and increasing gas", the status of unconventional oil and gas development is increasing day by day. According to public data, in 2022, China's crude oil imports will account for more than 70%, natural gas imports will account for more than 40%, and oil and gas resource imports will account for a relatively high proportion. However, China has abundant unconventional oil and gas reserves, among which shale gas reserves are the first in the world and the third in the world.

In addition, since 2020, oil prices have continued to run at high levels, and the expectation of continued high oil prices has boosted upstream capital expenditure for oil and gas exploration. In 2023, PetroChina, Sinopec and CNOOC are expected to have a total capital expenditure of more than 500 billion yuan, driving the prosperity of the oil and gas exploration and production industry to continue to improve, and the fracturing equipment market has a broad space, and it is expected that the market size of China's solid pressure equipment will exceed 10 billion yuan in 2025.

In response to the macro background's demand for unconventional oil and gas to support energy security, Sany International's acquisition can help it open up the market space for solid pressure equipment. The company said, "After this acquisition, Sany International's energy equipment business segments such as coal machinery will be further expanded, especially in coalbed methane mining." ”

The main business of Sany Petroleum Technology is operated by Sany Petroleum Intelligent Equipment and its subsidiaries, which are mainly engaged in the research and development, production and sales of fracturing equipment and accessories in oil and gas fields, as well as technical services related to cementing and stimulation in oil and gas fields. The company has a full range of complete sets of fracturing equipment products (mechanical, hydraulic, electric drive) and drilling and workover rig string automation equipment products.

According to the announcement, from 2020 to 2022, the sales volume of Sany Petroleum Technology's vehicle-mounted fracturing equipment will be 131 units, 224 units, and 181 units, respectively, with a market share of 17.10%, 29.83%, and 26.89%, respectively, and the sales volume and market share will rank first for two consecutive years in 2021 and 2022. Among them, in 2022, the market share of fracturing trucks will be 25.35%, the market share of sand mixing vehicles will be 33.33%, and the market share of instrument vehicles will be 39.02%.

In 2022, the top five companies in the fracturing equipment industry accounted for more than 75% of the combined market share. Due to the high competition threshold and high industry concentration in the industry, the profit margin of the industry is higher than the average level of the special equipment industry.

Therefore, from 2020 to 2022, Sany Petroleum Technology has achieved a high growth rate, with revenues of 895 million yuan, 1.740 billion yuan, and 2.087 billion yuan respectively, and net profit after tax of 70 million yuan, 304 million yuan, and 386 million yuan respectively.

In terms of the development of state-owned users, from 2020 to 2022, the revenue of state-owned customers of Sany Petroleum Technology increased from 154 million yuan to 596 million yuan, with a compound annual growth rate of about 97%, and the proportion of revenue increased from about 17% to about 29%, and it is expected that the proportion of state-owned customers will remain at 30% to 40% in the future.

As of the end of 2022, the company's net asset value was approximately $567 million.

In addition, in terms of the purchase price, Wayne FUNG, an analyst at CMB International, believes that the purchase price of 2.98 billion yuan means that the price-to-earnings ratio of only 7.7 times in 2022 is lower than the valuation of Jereh shares of 12.8 times and Sany International's valuation of 11 times. "Assuming that Sany Petroleum Technology's earnings increase by 30% this year, the acquisition will increase Sany International's earnings by 20% in 2023. Given Sany International's net cash position, ROE will improve as idle cash will be utilised. ”

At the same time, this acquisition is a continuation of Sany International's internationalization strategy. In 2022, Sany International's international market expansion has achieved remarkable results, with a significant increase in international sales revenue of mining equipment and logistics equipment, and a year-on-year increase of 101.5% in the company's overseas sales revenue.

At present, Sany Petroleum Technology has reached orders with local customers in Central Asia, Japan, the Middle East, Africa, Latin America and other countries and regions, and will enter the European and American markets in the future and further go to sea.

In 2022, Sany International's revenue will be approximately RMB15.537 billion, an increase of approximately 52.4% year-on-year. The company said that the main reason for the growth of performance is first of all the rapid introduction of intelligent and electrified products into the market.TBMs, fully mechanized mining, wide-body vehicles and logistics equipment products revenue increased.