Yangzijiang Shipbuilding - CGS-CIMB Research 2021-06-24: Pay Up For The Slot

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YANGZIJIANG SHIPBLDG HLDGS LTD (SGX:BS6)

Yangzijiang Shipbuilding - Pay Up For The Slot

• Yangzijiang Shipbuilding (SGX:BS6) is still able to take on orders for 2022-23 delivery with better pricing as seen in the latest win worth US$715m. Order book is at a record US$7.3bn.
• To manage yard tightness, Yangzijiang Shipbuilding could subcontract portions of work to smaller fabricators. Margin should be healthy as steel price pressure eases.
• Our target price of S$1.63 for Yangzijiang Shipbuilding is based on 1x P/BV or +1 standard deviation from its 6-year average. Stronger orders are catalysts while rampant order cancellation is a key risk.

US$715m total order, ~US$250m for YAMIC’s breakthrough in LPG

• Yangzijiang Shipbuilding announced contract wins of US$715m, bringing order wins to US$4.72bn year-to-date and order book to US$7.3bn, higher than the 2008 peak of US$6.9bn. Deliveries of these vessels are over 2022-2024.
• In this order, Yangzijiang Shipbuilding’s JV Yangzi Mitsui Shipping (YAMIC) also saw its first breakthrough in LPG vessels, securing the first batch of 3 units from a German ship owner. We estimate the contract value for these LPG vessels to be ~U$250m, bringing YAMIC’s order book to ~US$750m.
• The remaining ~US$465m orders to be built by Yangzijiang Shipbuilding’s fully owned yards comprised of 1 unit of 9,150DWT chemical tanker, 1 unit of 29,800DWT selfloading bulk carrier, 2 units of 2,400TEU containerships, 5 units of 3,500TEU containerships and 2 units of 11,800TEU containerships.

Managing yard tightness and charging higher for slots

• To manage the Shanghai Containerized Freight Index (SCFI) remaining high at a record level of ~3,700, we think shipping clients could be pressed for slots and will pay to secure the space.
• We are keeping our shipbuilding gross concerns of margin compression.

Reiterate ADD and target price of S$1.63; upside to 2022 outlook

• See
  • Yangzijiang's Share Price,
  • Yangzijiang's Target Price,
  • Yangzijiang's Analyst Reports,
  • Yangzijiang's Dividend History,
  • Yangzijiang's Announcements,
  • Yangzijiang's Latest News.
• The unabated rise in the shipping index and momentum of orders in 1H21 could see Yangzijiang Shipbuilding's management lifting its sharp appreciation in steel price and RMB.

LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2021-06-24

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