Lim Siew Khee and Meghana Kande of CGS International have maintained their "add" call on Yangzijiang Shipbuilding. As they have raised their earnings estimates to take into account higher revenue and margins, they have derived a higher target price of $3.62 from $3.20 previously.
In their Jan 7 note, the analysts expect the company to report on Feb 27 2HFH2024 earnings of RMB3.2 billion, up 33% y-o-y, thanks to stronger deliveries and margins.
According to Clarksons, the company in FY2024 delivered 64 vessels - mainly higher-margin containerships, slightly beating its target of 63 ships. In the preceding 2023, it delivered 57 vessels.
Lim and Kande figure that Yangzijiang Shipbuilding is benefitting from a weakening RMB, which has depreciated by 4% versus the US dollar since last October. The China-based company books most of its costs in RMB but generates revenue in US dollars.
The analysts are eyeing FY2025 order win targets by the company as a possible catalyst.
"The containership ordering upcycle remained strong in 2024 as liners continued their fleet rejuvenation programmes," state Lim and Kande.
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They recall that in its 3Q24 business update briefing, the company has guided for a higher FY2025 order win target of more than US$4.5 billion on expanded capacity from its new yard at Xinqiao Park, which will be ready in FY2026.
For now, the CGSI analysts are keeping their FY2025 and FY2026 order win forecasts at US$5.5 billion per year.
They are maintaining their bullish stance on this counter, noting the company's "superior" ROE of 27% versus its peers in China which could only fetch 4%.
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Along with raised earnings estimates pegged to 12x FY2026 earnings, they have derived a higher target price of $3.62.
Yangzijiang Shipbuilding gained 3.05% to change hands at $3.04 as at 11.13 am.
