DBS Group Research has described the latest order wins announced by Yangzijiang Shipbuilding as "Christmas came early", as it maintains its "buy" call and $2.88 target price on the stock.
On Dec 2, the company announced it won orders for 21 ships worth US$2.63 billion - just less than a month after its previous update. This brings its year-to-date wins to more than US$14.7 billion and total order book to around US$24 billion.
The win, according to DBS, "blew market expectations".
On Nov 25, Yangzijiang Shipbuilding was included in the MSCI index and hit a high of $2.69 the day earlier. Since then, it has corrected by 10% to around $2.40.
DBS suggests that this drop is due to post-inclusion adjustment and broad market jitters on US tariff and thus a "window of opportunity" to buy.
"Fundamentally, we remain confident of Yangzijiang’s order wins and double-digit earnings growth," says DBS.
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DBS notes that with the company's yards full through 2028 and currently filling up slots for 2029, it will be expanding capacity and thereby help add 15-20% to its revenue.
In their Dec 2 note, Lim Siew Khee and Meghana Kande of CGS International believe that the strong order wins enjoyed by Yangzijiang stem from "firm" freight rates which encourages shipowners to continue with their fleet renewal programme.
At the same time, they can shift their newly built ships to those that can also run on cleaner fuel.
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They note that Yangzijiang is now trading at a discount of 30% versus its peers' 12x FY2026 earnings, which presents a "buying opportunity" given its strong orderbook and "superior" ROE of 27%.
Lim and Kande expect the company to win orders of some $5.5 billion this coming FY2025 and the following FY2026.
They are reiterating their "add" call and $3.20 target price, which is in line with the valuation multiple of 11x FY2026 earnings accorded to comparable yards in Japan and Korea. In contrast, Chinese-listed yards can fetch a higher valuation of around 16x FY2026 earnings.
For Lim and Kande, key re-rating catalysts include capacity expansion and stronger-than-expected order wins.
Downside risks, in their view, include a surge in steel costs, order cancellations, and unfavourable policy action against the Chinese shipbuilding industry by the newly elected US government.
Yangzijiang shares closed at $2.43 on Dec 2, unchanged for the day but up 57.8% year to date.
