Yangzijiang Shipbuilding's stock price was as low as 90 cents in June 2022 before recovering nicely to end the year at $1.36. It drifted lower subsequently before some recent tailwind lifted the stock, which closed at $1.45 yesterday on the back of newsflow relating to contract wins. Below are excerpts from yesterday's CGS-CIMB report.


Analyst: Lim Siew Khee

Riding the green shipbuilding cycle
■ YZJSB announced that its YTD order win reached US$5.6bn, beating our US$4bn-5bn estimates (see report) and management’s guidance of US$3bn.

YANGZIJIANG 

Share price: 
$1.35

Target: 
$1.66

■ This includes orders of 6 units of 9k TEU methanol dual fuel containerships from Maersk for 2026-2027 delivery.

■ All in, the company has secured 69 vessel orders YTD, bringing its orderbook to US$14.6bn, with 180 vessels due for delivery.

■ We expect positive share price reaction. Retain Add and TP of S$1.66.


bestworld9.22

US$5.6bn order in the bag YTD...

... surpassed US$4.4bn in 2022

To recap, Yangzijiang Shipbuilding’s (YZJSB) contract wins are as follows:

Orders accelerating

Year to date
(Jan-June 2023)

US$5.6 billion

Full year 2022

US$4.4 billion

Outstanding orderbook

US$14.6 billion

● 25 Apr 2023 business update: US$1.18bn of contracts comprising 18 oil tankers, 1 liquefied ethylene gas (LEG) vessel, and 4 bulk carriers.

● 26 Jun 2023: 2 units of 83.3k TEU combined carriers for Klaveness Combination Carriers ASA for 2026 delivery. Amount undisclosed, but we estimate it to be about US$169m-180m in total.

● 27 Jun 2023: 6 units of 9k TEU methanol dual fuel containerships for A.P. Moller- Maersk (Maersk) for 2026-2027 delivery.

Amount was not disclosed, but industry publication Tradewinds reported on 26 June 2023 that Maersk awarded a contract value of US$1.15bn for 10 units of similar 9k TEU vessels to YZJSB. We take US$115m/vessel as an indicative price for the Maersk order announced.

● 27 Jun 2023: 37 vessels comprising 10 LNG dual-fuel 24k TEU containerships, 4 methanol dual fuel 950 TEU, and 2 8k TEU containerships, 11 oil tankers, and 10 82.5k dwt bulk carriers. We believe the 24k TEU LNG dual fuel containerships belong to CMA CGM and priced in the region of US$240m each (according to Tradewinds).

● All in, YTD order wins totalled US$5.6bn, exceeding management’s guidance of US$3bn for 2023F. Its orderbook now stands at US$14.6 bn for 180 vessels.

Availability in 2026F?

● The questions always arises about when peak delivery is.

We believe there could be several slots left for 2026F, depending on pricing and yard optimisation.

More newsflow

LimSiewKhee2020We believe decarbonisation and green financing availability could spur more dual-fuel ships orders in the near term.  We expect positive share price reaction from the newsflow.”

-- CGS-CIMB analyst Lim Siew Khee

YZJSB’s current assumption on steel price stands at Rmb5k/tonne, which points to decent margins to be made from these contracts, with potential for expansion if steel price remains controlled.

● We believe decarbonisation and green financing availability could spur more dual-fuel ships orders in the near term.

● We expect positive share price reaction from the newsflow. Reiterate Add and TP of S$1.66, still based on 1.7x CY23F P/BV, a 30% premium over regional yards’ 1.3x average, given its stronger margin track record, justified by its FY23-24F ROE of 18%.

● Catalysts: Stronger-than-expected margins, further contract wins, exceeding 2021’s record of US$7.4bn.
Downside risks: sharp rise in steel costs eroding margins, and order cancellations weakening its earnings visibility.

Full report here.

UOB Kay Hian's report is here.

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