UOB Kay Hian

Monday, 26 May 2025

Yangzijiang Shipbuilding: Big Backlog, New Orders Needed

Company Overview

Yangzijiang Shipbuilding (Holdings) (YZJSGD SP), established in 1956 and based in Jiangsu, China, stands as the country’s largest private shipyard [[1]]. It constructs a diverse array of vessels, including containerships, bulk carriers, and LNG carriers, serving clients across North America, Europe, and Asia [[1]].

• GICS Sector: Industrials [[1]]
• Bloomberg Ticker: YZJSGD SP [[1]]
• Shares Issued (m): 3,935.6 [[1]]
• Market Cap (S\$m): 8,107.3 [[1]]
• Market Cap (US\$m): 6,301.8 [[1]]
• 3-Mth Avg Daily Turnover (US\$m): 55.3 [[1]]
• 52-Week High/Low: S\$3.32/S\$1.75 [[1]]

Stock Performance

Here’s a snapshot of Yangzijiang Shipbuilding’s price performance [[1]]:

• 1 Month: (6.8%) [[1]]
• 3 Months: (37.6%) [[1]]
• 6 Months: (22.3%) [[1]]
• 1 Year: 17.7% [[1]]
• Year-to-Date (YTD): (31.1%) [[1]]

Major Shareholders

Key stakeholders in the company include [[1]]:

• Yangzi International: 21.59% [[1]]
• Lido Point Investment: 9.98% [[1]]
• T. Rowe Price: 8.3% [[1]]

Financial Data

• FY25 NAV/Share (Rmb): 8.85 [[1]]
• FY25 Net Cash/Share (Rmb): 4.81 [[1]]

Investment Thesis

Despite weak order wins in 1Q25, Yangzijiang Shipbuilding’s substantial US\$23.2 billion orderbook offers revenue visibility through 2028, supported by robust margins and consistent delivery progress [[1]]. Expansion plans, including investments in yards and LNG, remain on track [[1]]. While share price volatility is expected, the company’s execution capabilities and earnings resilience underpin the maintained BUY rating [[1]]. The target price has been adjusted to S\$3.29 from S\$3.50 [[1]].

Recent Developments

• New Order Wins Needed: YZJ’s business update indicated new orders of only US\$0.29 billion in 1Q25, representing 5.0% of its 2025 target [[2]]. Clients are adopting a cautious stance due to global tariff uncertainties [[2]]. Importantly, no order cancellations or delivery delays have been requested [[2]].
• Management’s Bearish Tone: The CFO’s cautious outlook during the analyst briefing, suggesting that new order wins may not significantly increase from 1Q25 levels, contributed to a 5.0% share price decline on Fri, 23 May [[2]].
• Focus on Earnings and Deliveries: With the yard full until the end of 2027, investors should prioritize earnings and ship deliveries [[2]]. Despite disruptions in new orders due to economic uncertainty from US tariffs, YZJ has medium to long-term revenue visibility until 2028, backed by a US\$23.2 billion orderbook with deliveries extending into 2030 [[2]]. Limited slots are available for small to medium-sized vessels in 2028 and for large vessels in 2029 [[2]].
• Solid Shipbuilding Margins: Following strong 2024 results driven by a substantial 2H24 shipbuilding margin (+3.8ppt sequentially to 29.7% vs. 2024 margin of 27.9%), YZJ reports that margins remain firm to date [[3]]. Steel costs for 2025 are secured, and the Rmb exchange rate is favorable for a strong 1H25 result [[3]].

Key Financials

The following table presents a summary of key financial data [[4]]:

Stock Impact Analysis

• Operationally Solid: YZJ is ahead of schedule for 2025, having completed 21 out of 56 scheduled vessel deliveries, representing a 38% completion rate [[5]].
• Growth Intact: YZJ has three growth initiatives planned over the next 12-24 months [[5]]:
  • Rmb3b capex for a second capacity expansion under Project Hongyuan, increasing shipyard area by 17% by end-26 [[5]].
  • Rmb2b capex for an LNG terminal business to diversify revenue streams, expected to be operational by 1H27 [[5]].
  • Yangzi Runze, a manufacturing base adjacent to the YAMIC joint venture, focusing on clean energy vessels [[5]].

Earnings Estimates

• No changes to earnings estimates [[5]].

Valuation and Recommendation

• Maintain BUY: The target price is slightly reduced to S\$3.29 (previously S\$3.50) based on a lower PE multiple of 9.1x (vs. 9.6x previously) due to recent market volatility [[5]]. This target multiple is one standard deviation above the company’s 10-year average of 6.6x, justified by earnings visibility into 2028 and a strong track record [[5]]. A 10-year average PE of 6.6x results in a fair value of S\$2.39 [[6]].
• Impact of No New Order Wins: Failure to secure new orders in 2025 and 2026 could negatively affect 2028 earnings [[6]]. However, long-term earnings visibility into 2028 suggests patient investors will be rewarded [[6]]. YZJ is considered inexpensive, trading at 2025F PE and EV/EBITDA of 5.8x and 2.9x, respectively, while delivering nearly 25% ROE and a 5.1% yield [[6]].
• Orderbook Composition: YZJ’s current orderbook comprises 230 vessels worth US\$23.2 billion as of 22 May 2025, with clean energy vessels accounting for approximately 74% of its orderbook value [[6]].

Potential Catalysts

• Consistent implementation of the share buyback program [[6]].
• Resolution of the US Trade Representative’s proposal to impose fees on Chinese-built vessels [[6]].
• New order wins for higher-margin vessels, such as dual-fuel containerships and oil/LPG tankers [[7]].
• Safe and efficient execution of the orderbook and maintenance of high shipbuilding margins above 20% [[7]].

Financial Charts

PE Chart

5-year mean: 5.2x [[7]]

10-year mean: 6.6x [[7]]

PB Chart

5-year mean = 1.1x [[7]]

Revenue Per Vessel vs Shipbuilding Margin

Source: YZJ [[8]]

Shipbuilding Order Win by Year and Type

Source: YZJ [[8]]

Detailed Financial Projections

The following tables provide comprehensive financial projections [[9]]: