Yangzijiang Shipbuilding (YZJSB) Stock Analysis: Full Yard Till 2028, Order Outlook, and TP – May 2025

CGS International

May 23, 2025

Yangzijiang Shipbuilding: Full Yard Through 2028 Signals Strength Amidst Tariff Uncertainty

Yangzijiang Shipbuilding (YZJSB) faces a mixed outlook as it navigates trade tensions and potential shifts in order placement preferences. Despite these challenges, the company’s full yard through 2028 provides a solid foundation.

Cautious Outlook for New Wins in 2025

• During its Q1 2025 analyst call, YZJSB expressed caution regarding new order wins for 2025, citing tariff tensions and uncertainties related to the implementation of the U.S. Trade Representative (USTR) policies. [[1]]
• While maintaining its US\$6 billion order guidance, management indicated a likely preference among shipowners to place new orders with Korean yards. [[1]]

Strong Order Book and Yard Capacity

• YZJSB boasts a substantial order book of US\$23.2 billion and a fully booked yard, with limited availability until 2028/2029. [[1]]
• Consequently, FY25F order wins have been adjusted to US\$2.5 billion, down from the initial US\$6 billion target. [[1]]

Financial Adjustments and Target Price

• A 2% reduction in FY25F EPS reflects adjustments for forex assumptions and anticipated weaker shipping revenue. [[1]]
• The target price has been lowered to S\$2.72, based on a 7x FY26F P/E ratio. [[1]]

Shipowners Adopt a Wait-and-See Approach

• YZJSB management believes shipowners may favor Korean yards in 2025 due to uncertainties surrounding USTR Section 301 and global trade tariffs. [[1]]
• Despite this, YZJSB still has slots available for large vessels with deliveries in 2028/2029. [[1]]
• New order win assumptions for FY25F are set at US\$2 billion, aligning with the company’s pre-COVID-19 average order win run-rate of US\$1.4 billion. [[1]]
• A selective strategy is expected in the near term, with a more aggressive approach anticipated in 2H25F pending clearer USTR 301 implementation and trade tariff direction. [[2]]

Low Cancellation Risk with Potential Renegotiations

• No delays or cancellation talks have occurred for the current order book, although inquiry levels are low, and some containership order options might not be exercised. [[2]]
• The US\$6 billion order target for FY25F is maintained based on production capacity rather than market demand, serving as an internal KPI for sales. [[2]]
• Sizeable order wins remain a key catalyst for the stock. [[2]]
• German Hapag-Lloyd is reportedly renegotiating to exercise options for six 16k TEU containerships with YZJSB after considering a non-binding Letter of Intent with Korean Hanwha Ocean, citing costlier contract prices from the latter. [[2]]

Yard Capacity Full Through 2028/2029, Margins Intact

• Delivery slots for 2027 are fully committed, with limited slots for 2028 primarily for small- to medium-sized vessels and a few large vessel slots available for 2029. [[3]]
• Steel requirements for 2025 deliveries have been secured. [[3]]
• Steel prices remained stable QoQ in 1Q25 (but down 14% YoY) at approximately RMB3.4k/tonne, suggesting a stable GM trend of around 29-30% for 1H25F (2H24: 30.6%). [[3]]
• YZJSB has not locked in new forex hedging contracts, managing exposure mainly at spot rates. [[3]]

Valuation and Recommendation

• The “Add” call is maintained, supported by the order book and deposits received, with stock valuations at 7x FY26F P/E, a ~50% discount to peers. [[3]]
• Key catalysts include clarity in USTR 301 implementation, progress in US-China trade tariff talks, and stronger-than-expected GM and order wins. [[3]]
• Key risks include order cancellations and sharp increases in steel costs. [[3]]

Other Key Highlights

• Management is committed to a 30% to 40% payout target range, with the final decision depending on year-end results. [[2]]
• Shipbuilding revenue for FY25F is expected to remain stable, with oil tankers (lower ASPs) comprising approximately 30% of the 56 vessels due for delivery. [[2]]
• YZJSB has bought back approximately S\$29.5 million worth of shares since April 25, with future buybacks considered in response to share price volatility. [[2]]
• Construction of two 175,000 cbm LNG carriers is on track; a decision on whether to sell or add them to its own fleet for chartering will depend on market conditions. [[2]]

Financial Performance and Estimates

Peer Comparison and Market Data

ESG Analysis

• YZJSB’s ESG score is C-, influenced by past controversies. [[5]]
• The company aims to improve energy efficiency in vessels, aligning with China’s carbon neutrality goals. [[5]]
• Approximately 74% of its order book consists of green vessels as of May 2025. [[5]]