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Yangzijiang Shipbuilding has already enjoyed a huge rerating over the past few years, so investors could ask whether the easy money has been made. Two recent analyst reports suggest otherwise. CGS International, in an Aug 6 note, maintained its ADD call with a target price of S$5.10. DBS followed on Aug 11 with a more bullish BUY recommendation and raised its target price from S$4.55 to S$5.60. While their earnings forecasts differ, both brokers arrive at broadly the same conclusion: Yangzijiang remains attractively valued because its earnings visibility, margins and returns are unusually strong for a shipbuilder. The immediate reason for the optimism was Yangzijiang's strong 1H2026 results. |
Revenue rose 36% year on year to RMB17.5 billion, while core net profit increased about 23% to roughly RMB5.1–5.2 billion. More striking was the 37% shipbuilding gross margin, a new high.
This margin performance is important because Yangzijiang is now recognising revenue from vessels ordered during 2023 and 2024, when newbuild prices were particularly attractive. The mix has also shifted towards higher-value vessels such as 24,000-TEU dual-fuel containerships and very large ethane carriers.
DBS believes shipbuilding margins could remain around 35%, provided the US dollar does not weaken substantially against the renminbi and steel prices remain reasonably stable.
| A US$22.4 billion cushion |
Perhaps the strongest part of the investment case is Yangzijiang's enormous orderbook.
At end-June, outstanding orders stood at US$22.4 billion, providing roughly four years of revenue visibility. The yards are largely full through 2029 and Yangzijiang is already discussing vessels for delivery in 2030.
DBS also points out that about 74% of the orderbook comprises containerships, which generally carry higher values and margins. More than 80% of the orderbook is linked to cleaner-energy vessels such as dual-fuel ships and gas carriers.
Yangzijiang's move into LNG carriers could prove especially significant because this is a technically demanding market with higher barriers to entry.
| More capacity, and potentially more Seaspan orders |
Another growth driver is the new Hongyuan yard.
The yard has already begun operations, contributing RMB545 million of revenue in 2Q2026, and is expected to be fully integrated by 2027. DBS estimates the expansion could increase Yangzijiang's overall yard capacity by around 20%.
There is also an interesting strategic angle from Yangzijiang's acquisition of a 10% stake in Poseidon, the holding company of major containership owner Seaspan.
Framing "Seaspan-linked order flow as an upcoming catalyst" CGS analysts Lim Siew Khee and Meghana Kande added:
"We think the strengthened relationship between YZJ and Seaspan could be translating into order flow. From Clarksons data, we understand YZJ may be in discussion with Seaspan for an order of six 11,800 TEU containerships for 2028F-29F delivery. If confirmed, we estimate this order could potentially be worth c.US$700m-800m."
| Valuation still looks surprisingly modest |
This is where the investment case becomes particularly interesting.
| Three reasons |
 "While shipbuilding orders have passed their 2024 peak (prices down ~5%), orderbook remains near record levels, YZJ offers compelling growth + yield over the next 2 years, with earnings likely only peaking 2027 or beyond."-- Ho Pei Hwa, analyst, DBS Research |
At DBS's reference price of S$4.20, Yangzijiang was trading at roughly 8.0 times FY2026 earnings and 7.4 times FY2027 earnings, despite forecast ROE of around 28-31%.
DBS also expects dividend yields of 6.2% in FY2026 and 6.7% in FY2027.
CGS arrives at a similar valuation conclusion, estimating around 8 times forward earnings and a roughly 6% dividend yield.
There is, however, an important difference between the two brokers. DBS expects net profit to rise from RMB10.9 billion in FY2026 to RMB11.8 billion in FY2027. CGS is more conservative, forecasting profits of around RMB10.1 billion in both years before easing slightly in FY2028.
But with a US$22.4 billion backlog, high ROE, substantial cash generation and a 6%+ prospective dividend yield, both analyst reports make a case that Yangzijiang's rerating story still has legs to run. |
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→ See also:Why Singapore Small- and Mid-Caps May Be Ready for a Second Look
