• Yangzijiang Shipbuilding's stock rose 8% post 1HFY25 results on at least one key piece of news: Despite only $0.74 billion order wins so far this year, Yangzijiang has secured US$2 billion worth of Letters of Intent.  • Thus, new ship orders are expected to materialise over the next few months as ship owners have digested the early-2025 developments about prospective US port fees targeting Chinese-built ships. Compared to yards in other countries, Chinese yards continued to be viewed as more attractive (since worker strikes don't happen and costs are competitive, for example). (See May 2025 article: YANGZIJIANG: Its ship orders will recover. Why wouldn't they? But how soon)
It looks headed up towards its $3.30 high achieved in Feb 2025, which is however below the current analyst target prices. • Read more what CGS International says .... |
Excerpts from CGS report
Analysts: Lim Siew Khee & Meghana Kande
Yangzijiang Shipbuilding
| Order outlook turned more positive ■ YZJSB’s 1H25 shipbuilding gross margin of 35% surprised on the upside, thanks to lower steel costs. We lift our GM forecasts to reflect the strong half. ■ Qoq, YZJSB is more positive as clients have started to negotiate for new orders. It received letters of intent (LOI) amounting to c.US$2bn currently. ■ We lift our FY25F order win target to US$3.7bn and our FY25-27F EPS by 4- 15% on higher GM and orders, which pushes our TP up to S$3.90. |
Yangzijiang's stock price had been rising with rising profits in recent years, until the US threatened, in Feb 2025, high port fees for Chinese-built ships.
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Lifting GPM to 30-32% for FY25-26F
1H25 net profit of Rmb4.18bn exceeded expectations, forming 60%/57% of our/Bloomberg consensus FY25F forecasts.
Revenue of Rmb12.8bn broadly in line at 45% of our FY25F but the net profit beat came mainly from lower steel prices that drove shipbuilding GM to 35% vs. our estimate of 29%.
The group delivered a total of 23 vessels (vs. 56 in 2025), including 4 delivered by its JV, Yangzi-Mitsui (unlisted).
Share of profits from associates also came in stronger than expected at Rmb481m (+79% yoy) from the execution of gas carriers.
We lift our shipbuilding GM forecasts to 30-32% for FY25-26F (from 29-29.7%) to reflect the strong 1H25. We believe 2H25F could see slightly lower overall GM vs. 1H25 as YZJ targets to deliver more units of lower-margin oil tankers.
As the China government plans to cut steel production to address the industry’s glut, management expects steel prices to inch up from 2H25F (current c.Rmb3,500/metric tonne).
Customers turned more positive, digested USTR
Order book stood at US$23.2bn, with c.US$740m YTD order wins.
However, relative to 1Q25, management has turned more positive as shipowners have digested the impact surrounding US Trade Representative (USTR) Section 301 against Chinse shipbuilders and started to order/negotiate for newbuild contracts.
We raise our FY25F order assumption to US$3.7bn.
YZJSB is currently seeing strong enquiries for small to mid-sized vessels (less than 5,000 TEU containerships) for delivery in 2028F/2029F.
YZJSB currently has c.US$2bn of LOIs awaiting final confirmation of orders.
With the current yard capacity, we see sustainable order wins of US$4.5bn p.a.
Its US$6bn order target set previously was on the assumption that another new yard (Runze) would take on large vessels for 2028- 29F delivery.
This plan is shelved.
Our TP is now based on 10x CY26F P/E (c.55% discount to Chinese/Korean peers for market cap size) vs. 7x previously as peer valuations have risen. |
Full report here.
