Jutao Offshore Oil Services ("Jutao" or the "Company") provides oil, water and natural gas treatment equipment, which is essential for oil / gas field development and production. The Group has evolved from a simple contract manufacturer to an enterprise that can provide one-stop design, purchasing and manufacturing services (EPC) to high-end customers.

The new Zhuhai plant increases production capacity and can provide undersea equipment products the completion of the second phase of Jutao's new Zhuhai plant not only increases Jutao's production capacity by 200%, but also enables Jutao to provide undersea equipment products to customers. Jutao is the only supplier of oil and gas undersea equipment products in China.

The increase in the development of oil fields has led to a rebound in the contribution of Penglai Jutao. Jutao owns Jutao in Penglai, a supplier of oil platform manufacturing and design services, with a 30% stake and is its largest shareholder. Its main customers are CNOOC and COSL. Therefore, as CNOOC increases its capital expenditure on oil and gas field development, the contribution of Penglai Jutao will increase.

Supply undersea equipment products to Chevron Corp's Wheatstone project. Through its strategic partner FMC Technologies, Jutao is building an underwater manifold for Chevron Corp's $29 billion Wheatstone LNG project in Western Australia. We expect Jutao to supply at least three sets of underwater manifolds to FMC Technologies between 2013 and the end of 2014.

We give Jutao a 'buy' rating for the first time, with a target price of HK $1.50 based on a price-to-earnings ratio of 15.0 times 2013 earnings.