HSBC: Jereh Oilfield Services (002353 CH) - Buy: Revisiting Long-Term Growth Potential
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HSBC maintains a Buy rating on Jereh Oilfield Services, substantially raising the target price from RMB 56.10 to RMB 98.00, implying 13.7% upside. Between November 2025 and January 2026, Jereh secured natural gas turbine orders from a US-based AI Data Center customer, with total contract value exceeding USD 300 million. However, HSBC believes turbine business growth is constrained by engine supply capacities from original equipment manufacturers like Siemens, Kawasaki, and Baker Hughes, and this growth potential is already priced in.
HSBC is more constructive on Jereh's core operations, arguing that rising global oil and gas field decline rates will sustain upstream capital expenditure resilience through 2050. The International Energy Agency estimates that maintaining current production levels requires average annual upstream investments of USD 540 billion. Because unconventional oil and gas extraction requires significantly higher investment, Jereh is strategically positioned to benefit given its focus on fracturing equipment used in unconventional drilling.
Furthermore, Middle Eastern gas production expansion offers additional market opportunities for its natural gas equipment and EPC business. HSBC adjusted its 2025 to 2027 net profit forecasts by negative 2.6%, positive 7.3%, and positive 11.3%, respectively, to reflect new US power generation contracts. The valuation methodology shifted from price-to-book to discounted cash flow, reflecting clearer long-term growth visibility.