Yangzijiang Shipbuilding - OCBC Investment 2021-05-03: Bulking Up On Its Order Book

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YANGZIJIANG SHIPBLDG HLDGS LTD (SGX:BS6)

Yangzijiang Shipbuilding - Bulking Up On Its Order Book

• Securing more orders as industry recovers.
• Held-to-maturity investments about 31% of total assets.
• Yangzijiang's share price currently trading at ~0.8x book.

Yangzijiang Shipbuilding reported decent 1Q21 results

• Yangzijiang Shipbuilding (SGX:BS6) reported a 25% fall in revenue to RMB2.6b but registered an 89% increase in net profit to RMB761m, such that the latter accounted for 28% of our full year estimates and generally within expectations. Net profit was boosted by reversal of impairment loss of debt investment at amortised costs (relating to its held-to-maturity investments) which amounted to RMB156m, as well as forex gains of RMB212m.
• Core shipbuilding margin improved from 8% in 1Q20 to 15% in 1Q21, with the construction of more containerships and larger-sized vessels in the quarter.

Outstanding order book of US$6.6b

• Year-to-date, Yangzijiang Shipbuilding won new orders of US$4.0b comprising 75 vessels; many were containerships.
• Recall that in 2020, Yangzijiang Shipbuilding secured new orders of 54 vessels worth a total of US$1.8b, which was about double that of 2019.
• This brought Yangzijiang Shipbuilding’s outstanding order book to US$6.6b (146 vessels), which should provide a stable revenue stream for at least the next two years. As mentioned in our earlier report, Yangzijiang Shipbuilding - OCBC Investment 2021-03-04: Higher Tides, order win momentum has been encouraging as demand and orders placed for containerships surged on the back of a global container shortage and multi-year high spot container freight rates.

Improving shipbuilding market; continue to monitor financing business

• Yangzijiang Shipbuilding had an outstanding balance of RMB14.9b of debt investments at amortised costs (held-to-maturity investments) as at end March, which accounted for about 31% of total assets.
• With improving prospects in the shipbuilding market, we raise our fair value estimate for Yangzijiang Shipbuilding from S$1.18 to S$1.45 (implies ~0.8x book) but would monitor closely the group’s financing business as well as the level of competition from fellow yards as well.
• Maintain HOLD.
• See
  • Yangzijiang's Share Price,
  • Yangzijiang's Target Price,
  • Yangzijiang's Analyst Reports,
  • Yangzijiang's Dividend History,
  • Yangzijiang's Announcements,
  • Yangzijiang's Latest News.

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2021-05-03

SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.450 UP 1.180