报告名称：Hilong Holding(01623.HK)Cut forecasts on inevitable margin squeeze & shrinki
报告类型：港股研究
报告日期：2016-01-22
研究机构：中金公司
股票名称：HILONG
股票代码：01623
页数：6
简介：Action
Due to the low crude prices and gloomy outlook, Hilong’sworkloads are falling, while its ASP and margins are stuck in a rut.We thus slash our 2015/16e EPS forecasts by 65/64% toRmb0.08/0.10, and estimate 2017e at Rmb0.12. Wemaintain our HOLD rating, but cut our TP by 45% fromHK$1.57 to HK$0.86, implying 0.38/0.36x 2016/17e P/B.
Reasoning
ASP and margins of equipment sales still in a downtrend.With lower crude oil prices and gloomy prospects for aninvestment recovery in 2016/17, we expect the ASP and marginsof drilling pipes and OCTG to remain weak.
Inevitable falling workload for oilfield services andoffshore engineering. Further capex cuts by global oilcompanies will inevitably be negative to Hilong’s oilfield services.Meanwhile COOEC’s pipe-laying volume dropped 93% YoY in1H15 and we expect this trend to continue in 2016, given theurgent need for investment cuts, likely squeezing the revenue andworkload of Hilong’s offshore business.
Earnings forecast and valuation
The profitability of equipment sales is expected to remain weakwhile the foreseeable further cuts in E&P activities will hurt thecompany’s workload in oilfield services and offshore engineeringsegments. Cut 2015/16e EPS by 65/64% toRmb0.08/0.10, and estimate 2017e at Rmb0.12.Maintain HOLD; cut TP by 45% from HK$1.57 toHK$0.86, implying 0.38/0.36x 2016/17e P/B.
Risks
Volatility in oil prices, price declines, capex cut in E&P sector,and cash flow pressure.

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