Fundamental
Second consecutive half-year to return profitable
Revenue of SPT increased by 29% yoy to RMB541mn in 1H18, ofwhich PRC market is the major driver with 53% revenue growth andrepresented 60% of total sales, while overseas market reported amoderate 5% growth. SPT achieved RMB20mn net profit in 1H18,which mark the second consecutive half-year for SPT to returnprofitable （RMB41mn profit in 2H17）。
Management remained confident to achieve annual sales target
While some investors may concern that SPT reported a hoh decline innet profit, we note that such comparison was distorted by theRMB41mn reversal of assets impairment booked in 2H17. TheCompany in fact achieved 45% hoh growth in operating EBITDA,according to our estimation. Besides, 2H is generally the peak seasonof SPT due to various reasons including common industry practice,holiday and climate. In view of current orders backlog and executionprogress, management remained confident to achieve its sales targetof RMB1.6bn in FY18E （implying ~100% revenue growth hoh）。
Ensure energy security now the top priority of PRC oil majors
Management also highlighted that after President Xi instructedvarious units to emphasize on national energy security in late Jul 18,all three Chinese oil majors are already putting more focus onproduction enhancement. SPT expect multi-year growth opportunity inunconventional resources （including shale gas） and underground gasstorage facilities. Moreover, management expect more upsides inASP for FY19E in comparison to FY18E given PRC oil majorsbecame less price sensitive and a tight supply in high-end services.Management expect to achieve 25-50% sales growth in FY19E, with afurther improvement in profit margin thanks to operating leverage.
Catalyst
FY18 results; News flow on new orders
Valuation
Attractive in a risk-reward perspective; Trading BUY
Share price of SPT has retreated by >50% in last three months, whichwe believe is largely due to the weak market sentiment, particularlythose companies with low trading volume. However, it is quite clearthat the worst has been over for SPT, and we expect the Company toachieve multi-year growth ahead. SPT is still trading below book（0.75X FY18E PB） with low gearing （RMB54mn net debt as of end1H18）， and current market cap is only ~40% higher than its trough inmid 2016, while based on past experience, companies in a cyclicalindustry generally enjoy enormous upsides from trough to peak.Hence we view that SPT is highly attractive from a risk-rewardperspective at current share price.