• Yangzijiang Shipbuilding, one of the largest non-state-owned shipbuilding companies in China, continues to wow the market. Its 1H2024 net profit soared 77% to RMB3.1 billion. At this pace, it will exceed S$1 billion this year. • Yangzijiang (market cap: S$10.8 billion) currently sits on an orderbook of US$20.2 billion, a record that outperforms its own previous records. • The order wins, whose progression is shown below, just keep rolling in for Yangzijiang especially post-Covid.  Source: CGS-CIMB, Company• To deal with the orderbook and future growth, Yangzijiang has made moves to acquire land for expanding its shipyard capacity. That's yet another sign that this year, which marks the 17th year of Yangzijiang's listing on the Singapore Exchange, is truly remarkable. Read more in excerpts from CGS's latest report below ... |
CGS analysts: Lim Siew Khee & Meghana Kande
■ YZJ’s strong 1H24 order wins of US$8.5bn surpassed its FY24 guidance of US$4.5bn. Slots at new yard are likely to be available for mid-2027 delivery.
■ Industry focus on energy transition presents YZJ diversification opportunities. Clean vessels’ orderbook share rose to 70% at end-1H24 (end-May 24: 61%) ■ We change our valuation to P/E (from P/BV previously) in view of YZJ’s strong earnings visibility. Our new TP of S$3.20 is based on 11x CY26F P/E. |
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| 1H24: containerships drive strong order wins |
Since its business update at end-May 2024, YZJ had won orders worth US$5.2bn for 41 vessels (total 1H24 wins: US$8.5bn).
These include 28 dual-fuel containerships, 3 bulk carriers, 4 very large ammonia carriers (VLACs), and 6 oil tankers. Its orderbook stood at US$20.2bn at end-1H24.
In addition, YZJ is targeting to start ship construction at its new yard, adjacent to its existing Xinfu yard, by 2026 for earliest delivery in mid-2027.
Management noted that all slots at the new yard are still available.
In our note dated 15 Jul 2024, we estimated that the new yard can deliver 5-6 vessels p.a., equivalent to US$850m1bn in orders.
We raise our FY24F/FY25F/FY26F order win forecasts to US$11.3bn/ US$5.2bn/US$5.2bn to reflect strong order wins, yard capacity availability and customer enquiries extending into 2029F.
| Shipbuilding GM uplift to slow, offset by better shipping margins |
We cut FY24F/FY25F/FY26F shipbuilding gross margin (GM) to 26.5%/27%/25% as YZJ’s delivery mix shifts towards oil tankers, which YZJ says command slightly lower GM than containerships.
Construction of tankers in its orderbook has begun, with deliveries to pick up from 2025F.
YZJ expects steel prices to remain broadly stable for the year.
Meanwhile, its shipping segment enjoyed strong GM of 40.5% in 1H24, up from 35% in 2H23 as bulk carrier rates remained elevated.
As of end-1H24, YZJ had 27 bulk carriers in its fleet
Diversification is a key focus
With the addition of orders for 47 new eco-friendly vessels in 1H24, clean vessels account for 70% of YZJ’s orderbook value as at end-Jun 2024.
The shipping industry’s focus on energy transition presents YZJ an opportunity to diversify away from containerships (c.84% of 1H24 shipbuilding revenues), towards medium-sized gas carriers.
50% of the US$3.3bn orderbook at its Yangzi-Mitsui yard (YAMIC) as at end-1H24 were for gas carriers.
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Full CGS report here.
DBS has raised its target price to $2.88.
UOB KH also upped its TP to $3.40.
