• Our article published on 21 Sept identified two potential orders coming Yangzijiang Shipbuilding's way: CMA CGM's worth close to US$3bn, and HMM's taking the combined value to about US$3.9bn. The article traced these to Splash247/Alphaliner and TradeWinds and made clear that the orders were not confirmed. • OCBC Group Research's initiation report on 9 Oct on YZJ takes things a step further. It calculates that if the CMA CGM and HMM orders materialise, all of YZJ's FY2030 slots would be filled -- and ventures a timeline for such an announcement. "Should these orders materialise, we believe they could be announced progressively, potentially as early as its 3Q26 business update in mid-Nov 2026." CGS International's report issued on the same day also referred to the two potential orders totalling US$3.9 billion and expected clarity from Yangzijiang: "Its upcoming 3Q26 business update (expected around 10 Nov) should confirm YTD order win momentum.• OCBC analyst Adrian Loh thinks shipbuilding margins can remain in the 30–35% range for another two to three years, rather than falling sharply once today's higher-margin 2023–24 orders have been delivered. • Adrian also lays out why 2027 order inflow may remain strong. And he is putting a valuation behind his thesis — BUY, target price S$6.10, slightly ahead of the S$6.00 target of CGS. Read excerpts of his report below ..... |
Excerpts from OCBC Group Research report
Analyst: Adrian Loh
• Market leader with strong earnings visibility given its USD22.4b orderbook; industry-leading margins and rising dividends support sustained earnings growth and industry-leading ROE and attractive shareholder returns
• Next growth leg emerging: LNG carrier ambitions, expanding yard capacity and potential unannounced orders underpin long-term growth as China’s shipbuilding dominance strengthens |
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| Investment thesis |
Following on from record earnings in 2025, Yangzijiang Shipbuilding (YZJ) delivered a 28.4% YoY increase in 1H26 PATMI.
Near term share price upside could come from the company continuing to surprise with better-than-expected new order wins and shipbuilding margins.
In our view, macro conditions are supportive for more order wins given continued geopolitical risks impacting shipping globally while specific China factors serve to support higher-for-longer shipbuilding margins.
We see the collapse of new order wins in 2025 as a blip and that 2026-27 momentum should be much stronger.
Initiating coverage on YZJ with a BUY rating and a SGD6.10 target price.
Investment summary
• Initiating coverage on YZJ with a BUY rating and a SGD6.10 target price based on a target P/E multiple of 10.7x applied to an aggregate of our FY2027-28E EPS.
In our view, our target multiple of 10.7x appears reasonable given YZJ’s average ROE of over 31% over FY2026-28E, net cash equal to 33-36% of equity throughout the forecast period and its strong track record of delivering its products on time and within budget.
• Order momentum is recovering, not collapsing. FY2025’s USD2.5b of new order wins (down from a record USD14.6b in FY2024) was the trough, not a new trend in our view.
While YZJ secured new orders worth USD1.75b in 1H26 (or 23% of its FY2026 target of USD4.5b), our channel checks suggest the company could be in advanced discussions for additional orders worth USD3-4b.
Should these orders materialise, we believe they could be announced progressively, potentially as early as its 3Q26 business update in mid-Nov 2026.
YZJ’s orderbook as at end-1H26 worth USD22.4b (256 vessels with deliveries through to 2030, 69-71% green/dual fuel tonnage) covers 4-5 years of shipbuilding revenue.
• Structurally higher shipbuilding margins. While YZJ’s 1H26 PATMI increase of 28.4% YoY and its annualised ROE of 32.3% was impressive, the more notable achievement was the company’s ability to surprise the market with ever higher shipbuilding margins in the past few reporting periods.
In 1H26, shipbuilding margins expanded by a further 1.9ppt YoY to 37.1%, handily beating its Korean and Chinese peers.
On our estimates, we have conservatively modelled a mild degradation of shipbuilding margins over the next two years as high-margin containerships are gradually built and delivered.
However, upside surprise could come from order wins for high-margin vessels, thus extending YZJ’s revenue runway into FY2031/32.
• Shareholder returns have re-rated sharply, and management has guided them higher still.  Adrian Loh, analyst
Importantly, it explicitly guided that its new and higher payout ratio is sustainable for both FY2026 and FY2027. |
• Key risks. Margin contraction from higher steel prices and a weaker CNY (given that ships are priced in USD); economic downturn resulting in non-replenishment of its orderbook; operational risks related to safe and timely delivery of its products.
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