CGS-CIMB analyst Lim Siew Khee says Yangzijiang Shipbuilding’s (YZJ) 2Q20 earnings of RMB773.9 million ($152.6 million) came in line with the brokerage’s expectations and consensus despite the 17% y-o-y fall.
See: Yangzijiang reports 2Q earnings of RMB773.9 million, down 17% y-o-y
Quarter-on-quarter (q-o-q), the group registered a 92% growth in earnings. This brings YZJ’s 1H20 net profit of RMB1.18 billion to 40% of its FY20F estimates.
Since its yard operations resumed to full capacity in April following the Covid-induced lockdowns, YZJ remains on track to deliver the targeted 51 vessels for FY20.
In the same quarter, shipbuilding gross margins jumped four percentage points y-o-y to 22% due to the 157k dwt oil tanker that was cancelled in 1Q20 and resold in 2Q20.
On that, Lim expects the group to register strong q-o-q revenue for 3Q20, especially as it has just delivered a 12,600 TEU containership, the largest the group has ever built.
In 2Q20, YZJ won some US$160 million ($219.2 million), bringing its total order wins to US$517 million for 1H20.
As at June 30, its order book stood at US$2.6 billion.
Lim says the stock is currently trading at a 10-year trough.
“In our SOP (sum of the parts), we value HTM at 1x FY20F P/BV and shipbuilding at 0.7x book value. Risks are order drought and cancellations. Catalysts are stronger-than-expected orders,” she says.
Lim has maintained her “add” recommendation on YZJ with an unchanged target price of $1.37 which represents a 50.2% upside on the stock.
As at 4.17pm, shares in YZJ are changing hands 3.5 cents higher, or 3.7% up, at 97 cents.
