North Drilling signs $159 million contract for four new rigs: a 1.94 P/E still depends on other operating items (7 November 2026)

North Drilling (HSHM) disclosed a contract after Saturday's close on 7 November 2026 at 14:49 Tehran time, in Codal material filing 1629064. Signed on 4 November with the National Iranian South Oilfields Company, it covers guaranteed purchases of services from four new 2,000-horsepower drilling rigs. The disclosed consideration is $159,082,000 plus 56.458 trillion rials, approximately 5.646 trillion tomans, for ancillary drilling services. The share's 7 November closing price was 6,390 rials as read at 17:35 and its exchange P/E was 1.94. The question is how much of that apparent bargain rests on repeatable operating earnings before the new rigs are deployed.

Background

The filing describes a public-partnership arrangement. Services from each rig are priced at $22,000 per day; operations run for 60 months and the initial contract term lasts 69 months from the start of procurement. Sahmino's arithmetic puts the dollar consideration at about 1,808 rig-days each: $159,082,000 divided by four rigs and $22,000. That is around 99.0% of the approximately 1,826 days in 60 months under a 365.25-day year. The dollar figure is consistent with the disclosed daily price and operational term.

Payment begins before service revenue does. Within 45 days of a guarantee, the buyer prepays an amount equal to 350 days per rig, in a conditional 70% instalment tied to a supplier contract and a 30% instalment tied to import documentation. At the stated day rate that is $7.7 million per rig, or $30.8 million for all four, 19.4% of the contract's dollar portion. The disclosed filing does not state the acquisition cost of the rigs, so it cannot establish the contract's profit margin. Later prepayments are offset against monthly statements during the 60-month operating phase.

The first session able to reprice the disclosure is Sunday 8 November. On Saturday, the recorded close was 6,390 rials at the 17:35 reading, up 1.75% from the 6,280-rial close of 4 November. A bid queue of 4,806,665 shares was displayed at 6,460 rials, around 2.6% of the 185.2 million share average of the last 20 trading sessions.

The figures

Each trailing amount adds audited 2025 full-year results to unaudited first-half 2026 and subtracts the restated first-half 2025 comparator. It is a reconstruction, not a printed column of a filing. The annual 2025 cash-flow comparator carried in the first-half filing is labelled restated and unaudited.

Drivers

The newly signed contract offers future service revenue; it is not recognised in the first-half statements. For scale only, Sahmino converted its dollar leg at the 7 November Exchange Centre remittance quote of 1,894,237 rials per dollar (08:17), yielding roughly 301.3 trillion rials, or 60.3 trillion rials per year over five years. The latter would equal 33.7% of the 178.667 trillion-rial trailing revenue through 22 September 2026. At the 7 November 17:29 free-market dollar quote of 2,665,050 rials, the illustrative share becomes 47.5%; annualising the rial leg adds 11.3 trillion rials, 6.3% of trailing sales. These are Sahmino scenarios assuming unchanged FX rates and even recognition, not company guidance. The procurement phase delays any operating start; the two currencies cannot be added without stating the assumed exchange rate.

Existing services are expanding. Subtracting the company's first-quarter Codal filing 1571121 from its corrected half-year filing 1618296 gives second-quarter revenue of 55,324,138 million rials, 38.1% above the same 2025 quarter, and gross profit of 13,547,671 million rials, 39.0% higher. The October monthly activity letter 1625917 reports 19,505,116 million rials of revenue, 29.4% above the average 15,078,440 million rials per month in the first half. Its existing South Oilfields line was just 80,000 million rials, or 0.4% of October revenue. The new contract has the potential to make the customer much more significant, after procurement and actual service delivery.

The headline jump in first-half net income also has a weak comparison period. Sahmino's subtraction of two filed columns yields a net loss of 1,989,566 million rials in the second quarter of 2025, as the net of other operating income and expenses was negative 9,212,492 million rials in that quarter. Of the 16,839,661 million-rial gain in first-half operating profit, 5,074,558 million rials, or 30.1%, came from gross profit, while 12,455,244 million rials, or 74.0%, came from the changed net other-operating line; higher administration costs offset 4.1%. The main statement does not disclose the constituents of that line.

Outlook

Other operating items are not new. Their net amounted to 47,843,305 million rials, 90.3% of operating profit in 2024, and 25,468,217 million rials, 41.8%, in 2025. In the reconstructed 12 months ending 22 September 2026 the share is 48.7%. Removing this net as a sensitivity, not dismissing it as worthless, leaves trailing pretax profit of 36,252,452 million rials. Applying the first-half effective tax rate of 19.5% gives about 29,172,349 million rials in hypothetical net income, about 1,621 rials per share, and a P/E of approximately 3.94 at the 7 November 6,390-rial close. The calculation shows why the reported 1.94 P/E depends on that line. The share's book value at 22 September was 6,863 rials per share, about a 0.93 price-to-book ratio on that same close. The 7 November sector P/E of 1.9 is not a reliable cheapness benchmark: the sector has just two constituents.

Cash is the other test. In the unaudited first half of 2026, standalone operating cash flow of 4,331,537 million rials was only 29.0% of 14,937,810 million rials of net profit, and 72% below the restated 2025 first half's 15,701,566 million rials. The company also advanced 3,350,000 million rials in loans to others, drew 3,858,317 million rials in borrowing, and ended the half with 841,126 million rials of cash. The 1 July 2026 assembly voted a 260-rial dividend out of 2,541 rials of 2025 EPS, a 10.2% payout, equal to a 4.1% historical dividend yield on the 7 November 6,390-rial close. Separately, Codal filing 1620201 of 26 October says a Petropars litigation decision favoured North Drilling at first instance, but the counterparty paid its appeal fee; that case has not reached final disposition.

Saturday's retail buy volume exceeded retail selling by 10,523,884 shares, approximately 67 billion rials at that day's close; buyer strength was 0.75, and seven of the previous 20 sessions had buy queues. Sahmino's own desk position as of 4 November is watch, with no open buy target or stop for HSHM. In the desk-wide historical record, 1,416 of 3,175 settled positions hit their target, or 44.6%. That aggregate record is not a success rate for North Drilling's new contract.

Conclusion

North Drilling looks inexpensive, but less so than the 1.94 ratio suggests: a scenario excluding net other operating items puts P/E near 3.94, and the new contract's margin is unknown. Sahmino's film reading, not an existing desk buy call: HSHM remains above 6,100 rials and tests the observed 6,800-rial high within ten sessions. Conditions: subsequent closes stay above 6,100 rials and volume stays near the 185-million-share average. Horizon: ten sessions from 8 November 2026. Invalidation: a close below 6,100 rials. From 6,390 rials, the 6,800-rial observed high implies 6.4% upside and the 6,100-rial invalidation implies 4.5% downside, both percentages based on 6,390; 6,390 is 6.0% below 6,800 using the high as the base and 4.8% above 6,100 using the invalidation as the base.

What to follow

• In the 8 November session, compare the closing price with the observed 6,800-rial high of 13 September and 6,100-rial invalidation, and volume with 185 million shares. The HSHM page on Sahmino shows the price and queue.
• Review the contract disclosure report; any later disclosure of rig purchase costs or procurement and operating dates would clarify its earnings impact.
• Compare the next monthly sales report with 19,505,116 million rials reported for October, including South Oilfields' existing 80,000 million-rial line.
• Compare net other operating items and operating cash flow in the next interim filing with the first-half 2026 cash-flow print of 4,331,537 million rials.
• In the Sahmino screener, enter the same four filters: trailing P/E below 4, annual revenue growth above 10%, net margin above 15%, and 20-session average trading value of at least 100 billion rials. The overnight 7 November read found 33 qualifying shares, including HSHM. The earlier 21 September valuation screen also identified North Drilling.