Key takeaway

JEREH GROUP is a leading domestic oilfield services equipment provider and a globally competitive integrated energy equipment and services company. It holds a leading market share in core products such as fracturing and cementing equipment and is the only Chinese fracturing equipment manufacturer to enter the high-end North American market. Its business spans oil and gas equipment, integrated natural gas services, gas turbine power generation, and new energy recycling. In addition, the rapid expansion of AIDC in North America has triggered power shortages, making gas turbines the optimal power source. The company possesses outstanding gas turbine integration capabilities and continues to secure scarce turbine engine resources, winning large orders from North American AI giants in succession. The power business has become a new high-growth engine with broad growth potential.

Thesis

Deeply engaged in the oil and gas equipment sector for over two decades, the company has grown into a leader in the domestic oilfield services equipment field. The company is a global integrated energy equipment and services provider encompassing high-end equipment manufacturing, oil and gas engineering services, new energy, and resource recycling. Deeply engaged in the oil and gas equipment sector for over two decades, it has built an equipment and service matrix covering the entire industry chain of exploration, drilling, completion, oil production, and surface gathering and transportation. Its core products, including fracturing, cementing, and coiled tubing equipment, firmly rank first in domestic market share. It is the only Chinese enterprise to export a complete set of fracturing equipment to the high-end North American market. At the same time, it has deployed integrated natural gas, gas turbine power generation, new energy materials, and resource recycling businesses, forming a diversified and synergistic global business landscape with prominent competitive barriers.

Global upstream oil and gas capital expenditure has entered a cyclical upswing, driving demand for oil and gas equipment. From 2020 to 2023, global upstream oil and gas capex posted a CAGR of 26.2%. IEF estimates that spending will rise to USD603bn in 2024, with a significant long-term investment gap remaining. Traditional diesel-driven fracturing equipment has entered a replacement window, and the substitution trend for high-end equipment such as electric-driven and turbine fracturing is clear. Domestic oil and gas reserve and production increases have become normalized. Multiple factors are resonating to drive sustained release of oil and gas equipment demand, bringing clear incremental opportunities for industry leaders.

With a comprehensive product matrix and full-cycle service capabilities, the company benefits from high prosperity in the oil and gas equipment industry. In oilfield service equipment, the company's electric-drive and turbine high-end fracturing equipment leads in technology and aligns with the upgrade direction for unconventional oil and gas development, with projects flourishing at home and abroad. Its natural gas business has built a full-industry-chain equipment system, delivering fruitful results in major domestic and international projects. With integrated capabilities in equipment manufacturing, technical services, and engineering EPC, the company continues to advance its global footprint and is well-positioned to fully share in the industry's prosperity dividends.

AIDC construction generates massive rigid demand for off-grid power generation, and the gas turbine export business enters a high-growth phase. Data center investment in the U.S. is growing exponentially, with AI computing power driving surging electricity demand, while North America faces insufficient grid supply and lagging grid connection, making gas turbines the optimal primary power solution for AIDCs. The company has built a complete power equipment system covering gas turbines, internal combustion engines, energy storage, and power supply and distribution, with strong gas turbine system integration capabilities spanning the 6MW- 35MW power range. It has partnered with Kawasaki Heavy Industries to complete its industrial model lineup, with products suitable for base-load, peak-shaving, and emergency scenarios in data centers. In 2025-2026, the company successively secured large gas turbine orders from AI giants in North America and globally. The power business has become the company's core high-growth engine, with vast medium- to long-term growth potential.

Investment recommendation: We estimate the company will achieve operating revenue of RMB20.863bn, RMB29.458bn, and RMB37.689bn in 2026-2028, representing YoY growth of 28.60%, 41.20%, and 27.94%, respectively. Net profit attributable to shareholders of the parent company is projected at RMB3.759bn, RMB5.494bn, and RMB7.142bn, with YoY growth of 40.23%, 46.16%, and 29.99%, respectively. The current market cap corresponds to P/E multiples of 39x, 27x, and 21x. Considering the company's industry position in its core oil and gas business, the scaling up of its natural gas EPC operations, the global gas turbine supply shortage, and its business development capabilities, we maintain "buy" rating.

Risks: ① Risk of global oil and gas capex falling short of expectations; ② Risk of AIDC gas turbine business expansion falling short of expectations; ③ Risk related to core gas turbine supply chain and integrated delivery.