Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD
Yangzijiang Shipbuilding (YZJ SP) BUY
Price/Target: S$1.00/Under Review Market Cap: S$3.8b 3-mth avg t'over: US$13.1m 52-week high/low: S$1.39/ S$0.77
1Q12: results without major surprise
Results
Results. Yangzijiang Shipbuilding (YZJ)'s 2Q12 results came without suprise. Revenue was Rmb3,937.6m (+13% yoy) of which shipbuilding revenue was Rmb3,602.5m (+14% yoy) and investment revenue generated from held-to-maturity investments, cash and Runyuan micro financing was Rmb330.7m (-2% yoy). FX gains declined by 90% to Rmb23m, which is the major reason leading to a yoy earnings decline. 2Q12 net income was Rmb878.1m (-10% yoy), representing EPS was Rmb0.23.
Margins. Overall gross margin (including investment business) slight improved to 31% 2Q11's from 30% due primarily to a surge in revenue from high- margin (almost 100%) investment business. However, shipbuilding margin declined to 24% from 1Q11's 27% and 1Q12's 26%, dragged down by low-margin ship breaking business and re-schedule of vessel deliveries.
Order cancellation. YZJ announced order cancellation of 8 vessels during 2Q12, including two 34,000 dwt and six 82,000 dwt bulk carriers. Cessation of the six Panamax bulk carriers not accounted for in 2Q2012 as it has yet to reach a meaningful recognition milestone. YZJ has re-sold both of the two 34,000 dwt vessels as well as one 82,000 dwt vessel. The re-sale will be recognised in 1H12.
New orders. In 1Q12, YZJ clinched orders of 4 vessels in 2Q12. In addition to 7 clinched in 1Q12, total new order for 1H12 is 11 vessels with total value of US$300m. Orderbook declined to 80 vessels with a total value of US$3.8b.
Our view
Negative priced in and maintain BUY. We believe market has already realized a margin contraction for shipyards given China Rongsheng's profit warnings and sluggish newbuild margin, so we believe the weak results have been priced in. We still have BUY rating and put TP/Earnings forecast under review. YZJ remains a very quality large-size shipyard with excellent operating efficiency and good risk management.
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD
| Research House: UOB KayHian | Price Call: BUY | Target Price: 1.00 |
Yangzijiang Shipbuilding (YZJ SP) BUY
Price/Target: S$1.00/Under Review Market Cap: S$3.8b 3-mth avg t'over: US$13.1m 52-week high/low: S$1.39/ S$0.77
1Q12: results without major surprise
Results
Results. Yangzijiang Shipbuilding (YZJ)'s 2Q12 results came without suprise. Revenue was Rmb3,937.6m (+13% yoy) of which shipbuilding revenue was Rmb3,602.5m (+14% yoy) and investment revenue generated from held-to-maturity investments, cash and Runyuan micro financing was Rmb330.7m (-2% yoy). FX gains declined by 90% to Rmb23m, which is the major reason leading to a yoy earnings decline. 2Q12 net income was Rmb878.1m (-10% yoy), representing EPS was Rmb0.23.
Margins. Overall gross margin (including investment business) slight improved to 31% 2Q11's from 30% due primarily to a surge in revenue from high- margin (almost 100%) investment business. However, shipbuilding margin declined to 24% from 1Q11's 27% and 1Q12's 26%, dragged down by low-margin ship breaking business and re-schedule of vessel deliveries.
Order cancellation. YZJ announced order cancellation of 8 vessels during 2Q12, including two 34,000 dwt and six 82,000 dwt bulk carriers. Cessation of the six Panamax bulk carriers not accounted for in 2Q2012 as it has yet to reach a meaningful recognition milestone. YZJ has re-sold both of the two 34,000 dwt vessels as well as one 82,000 dwt vessel. The re-sale will be recognised in 1H12.
New orders. In 1Q12, YZJ clinched orders of 4 vessels in 2Q12. In addition to 7 clinched in 1Q12, total new order for 1H12 is 11 vessels with total value of US$300m. Orderbook declined to 80 vessels with a total value of US$3.8b.
Our view
Negative priced in and maintain BUY. We believe market has already realized a margin contraction for shipyards given China Rongsheng's profit warnings and sluggish newbuild margin, so we believe the weak results have been priced in. We still have BUY rating and put TP/Earnings forecast under review. YZJ remains a very quality large-size shipyard with excellent operating efficiency and good risk management.
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