1H17EPS declines by 77.0% yoy; 2Q17turnaround to profit making。    COOEC 1H17net profit declined by 77.0% yoy to RMB200m or EPS of RMB0.05.We saw the earnings momentum shift, with 2Q17returning to profit making witha net profit of RMB370m or EPS of RMB0.08(vs. net loss of RMB170m in 1Q17).1H17net profit tracks 17% of DBe FY17E and 15% of consensus estimates. 1H17core earnings would have been down 29% yoy after stripping out one-off items inboth years (including assets disposal gains, government subsidy and investmentloss on fair value). Despite that 2Q17has shown signs of earnings recovery, givenlow-for-longer crude oil price, we expect challenging headwinds ahead. Hence,with balanced risks and reward, we maintain our Hold rating with target priceof RMB7.1.。    Mixed bag in operations; new order +41% yoy in 1H17。    Overall revenue dropped by 18% yoy driven by low oil price, causing lower volumewhich created work conducted over 475k working hours, EPC steel structurefabrication completed with 36.6k tons and oceanic installation completed in 2800vessel working days in 1H17. However, offshore and non-oceanic told differentstories. Offshore EPC segment revenue dropped by 39% yoy to RMB1.8bnwhile non-oceanic EPC revenue recorded 13% yoy growth to RMB2.3bn. Theoffshore vessels working days dropped by 33% yoy while onshore steel structurefabrication volume grew by 43% yoy. 1H17gross margin registered 18.9%(+2.7%pt and +3.6%pts vs. 2H16and 1H16). The company recorded neworders of RMB5.3bn, +41% yoy, of which RMB5.1bn contributed was fromdomestic orders. In terms of noticeable contribution, completion of Yamal LNGproject helped Qingdao subsidiary, with a registered net profit of RMB752m .Management expects global E&P capex to recover by 3-5% yoy to US$450bn in2017while still staying significantly below the 2014peak of US$7400bn. Withsluggish oil prices ahead, the company believes many E&P projects will likely bedelayed.。

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