Revenue, which came in at RMB12.8 billion, is broadly in-line at 45% of the pair’s FY2025 forecast.
The group delivered a total of 23 vessels in the first half including 4 delivered by its unlisted joint-venture (JV), Yangzi-Mitsui.
Share of profits from associates also came in stronger than expected at RMB481 million from the execution of gas carriers.
Lim and Kande write: “We lift our shipbuilding gross margin forecasts to 30% to 32% for FY2025 to FY2026 to reflect the strong 1HFY2025. We believe 2HFY2025 could see slightly lower overall gross margin versus 1HFY2025 as YZJ targets to deliver more units of lower-margin oil tankers.”
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Meanwhile, YZJ’s dividend payout remains at 30% to 40%.
The group’s management expects steel prices to inch up in the 2HFY2025. Currently, steel prices stand at around RMB3,500 per metric tonne as at the Aug 7 report.
Presently, YZJ’s order book stands at US$23.2 billion ($29.8 billion), with around US$740 million order wins year-to-date.
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“However, relative to 1QFY2025, management has turned more positive as shipowners have digested the impact surrounding US Trade Representative (USTR) section 301 against Chinese shipbuilders and started to order or negotiate for newbuild contracts,” write Lim and Kande.
With this, the pair have raised their FY2025 order assumption to US$3.7 billion.
The group is currently seeing strong enquiries for small to mid-sized vessels for delivery in the FY2028 or FY2029.
The analysts write: “YZJ currently has around US$2 billion in letters of intent (LOI) awaiting final confirmation of orders. With the current yard capacity, we see sustainable order wins of US$4.5 billion per annum (p.a.). Its US$6 billion order target set previously was on the assumption that another new yard (Runze) would take on large vessels for FY2028 to FY2029 delivery. This plan is shelved.”
Their target price is now based on 10 times FY2026 price-to-earnings ratio (P/E) versus seven times previously as peer valuations have risen.
Lim and Kande see that YZJ is able to “cherry pick orders with higher average selling prices (ASP), as yards, such as new Yangzi and Xin Fu, are largely full. Hong Yuan yard is also almost full, with delivery of its first vessel in FY2027.
They write: “Although management is seeing stiffer competition from domestic yards that expanded capacity and prices of ships are dipping slightly, we are not alarmed as global yard capacity is tight.”
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YZJ also intends to charter out the first liquefied natural gas (LNG) carrier built) as a proof of concept in the industry.
Re-rating catalysts noted by Lim and Kande include the ebbing of trade tension, stronger-than expected gross margins and order wins. Conversely, downside risks include order cancellations and a surge in steel costs.
Shares in Yangzijiang Shipbuilding closed 21 cents higher or 7.99% up at $2.84 on Aug 7.
