YANGZIJIANG SHIPBLDG HLDGS LTD (SGX:BS6)
Yangzijiang Shipbuilding - Struck Gold But Unappreciated
- Yangzijiang Shipbuilding announced US$871m order win, hot on heels of last week’s US$715m. year-to-date win of US$5.59bn exceeded management’s guidance (US$5bn).
- Deliveries are scheduled in 2023/2024, suggesting that shipowners could take a view that the super cycle in freight rates could last in the medium term.
- We expect Yangzijiang's share price to move positively on the back of record order book of US$7.72bn. Maintain ADD call on Yangzijiang Shipbuilding (SGX:BS6) and target price of S$1.63 based on 1x FY21F P/BV.
Yangzijiang announced US$871m total order, year-to-date win crossed US$5.59bn
- Yangzijiang Shipbuilding announced contract wins of US$871m, bringing order wins to US$5.59bn year-to-date and order book to US$7.72bn. The orders comprise delivery of
- six units of 15,000TEU containerships from a repeat customer, Seaspan, for 1H24 delivery,
- three units of 3,300TEU containerships for Ningbo Ocean Shipping with deliveries from 2H23 to 1H24 and
- two units of 82,300DWT bulk carriers for 1H23.
- We believe these orders are secured close to our shipbuilding GM forecast of 17-20% for FY21-22F.
Trusted yard
- Industry news recently reported that Seaspan was close to awarding orders for 20 mid-size containerships of 7,000TEU to the Chinese state-owned yards – Dalian Shipbuilding, Shanghai Waigaoqiao and Guangzhou Huangpu Shipbuilding for deliveries in 2023. While this could still be negotiated, Seaspan’s firm order with Yangzijiang Shipbuilding for larger-sized vessels is a testament to Yangzijiang Shipbuilding’s track record and reputation.
- According to Seaspan’s simultaneous announcement, it has awarded contracts to a major shipyard for six high-quality 15,500 TEU containerships that will be scrubber-fitted and include industry-leading emissions reduction technologies. Upon completion, the vessels will enter long-term charters with leading global liner customers.
Higher for longer
- The Shanghai Containerized Freight Index (SCFI) reached ~3,785 as of 25 Jun. We take the cue from the latest orders for Yangzijiang Shipbuilding that shipowners could be taking a bullish view on freight rates in the medium term.
- According to Clarksons Research, the near-term container market outlook remains firmly positive, supported by robust trade and ongoing logistical disruption and port congestion, against the backdrop of manageable supply growth through to 2022.
Exceeded expectations in order wins
- Yangzijiang Shipbuilding’s order wins have exceeded management’s guidance and our expectations of US$5bn. We see earnings upside for FY23 earnings if the momentum continues into 2022. We have factored in US$2.5bn for 2022.
- See
- Catalysts: stronger orders.
- Risks: sharp appreciation of RMB and steel costs as well as order cancellations.
LIM Siew Khee
CGS-CIMB Research
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https://www.cgs-cimb.com
2021-06-30
SGX Stock
Analyst Report
1.630
SAME
1.630
