**Abstract**
A recent research report on Jiang Drilling Co., Ltd. (000852) highlighted the company’s dominant position in the domestic roller cone bit market, where its products are essentially monopolized. In contrast, the diamond drill bit segment is highly competitive. Before the number of gas wells reaches a significant scale, the company is expected to remain a key player in oil drill bit production over the next two to three years. However, sales growth for oil drill bits is expected to be limited due to market saturation and increasing competition.
The gross profit margin for drill products is significantly higher than that of other main products, so any decline in drill business revenue could negatively impact the company’s overall profitability. Despite this, the company maintains a strong competitive edge in roller cone bit manufacturing, with world-leading production capacity and a market share exceeding 80% in the domestic market, including dominance in deep wells over 3,000 meters.
Several factors contribute to the slow growth in roller cone bit sales: (1) the gradual shift in demand from roller cone to diamond bits, (2) the low current proportion of gas well development, (3) an already high domestic market share, and (4) limited overseas expansion due to intense international competition. Additionally, rising raw material and labor costs have further pressured margins.
In the diamond drill bit market, competition is fierce, and the company currently holds a small market share, making rapid expansion challenging. To address this, the company has been actively adopting advanced U.S. manufacturing technology to strengthen its position in the high-end segment. However, entry barriers in this industry are relatively low, as many oilfields operate their own private manufacturers, resulting in lower gross margins for ordinary diamond bits.
Although the price of a single diamond bit is higher than that of a roller cone bit, it can reduce overall drilling costs by shortening drilling time and rig idle time. The company’s diamond drill products are positioned at the high end, with historical collaborations with companies like Baker Hughes and Hijet Corporation. It also aims to localize diamond composite chips, which are currently mostly imported.
Beyond drill bits, the company is expanding into CNG compressor products, benefiting from China’s growing natural gas pipeline infrastructure. A recent large order from Sino-Petrochemical North China branch has boosted advance receipts, indicating strong demand. Natural gas sales also saw a 47% increase last year, driven by expansion into automotive and industrial markets around Wuhan.
However, the company faced challenges in the PV industry, with its trichlorosilane subsidiary, Jiangtong Tianxiang, nearly shutting down due to market downturns. Bleaching powder remains a key contributor to its chemical business, and the company remains optimistic about its future prospects.
Looking ahead, the company plans to expand into new areas such as downhole power drills and marine underwater oil and gas equipment. Initial production lines for screw drilling tools are already operational, and the company is making progress in deep-sea technologies under the National 863 Program.
With Sinopec’s petroleum engineering restructuring, the company may see positive impacts on its performance. Analysts expect sustained growth in the natural gas drilling sector and potential benefits from the reorganization. However, given the current performance and market conditions, the investment rating remains “neutral.â€
For 2013–2015, the company is projected to earn 0.34, 0.38, and 0.43 yuan per share, respectively. At a closing price of 16.4 yuan, the P/E ratios are 48.5, 43.3, and 38.3 times, reflecting a high valuation. While the market is optimistic about long-term growth, analysts suggest caution due to the need for sustainable performance improvements.
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