CGS International
August 7, 2025

Yangzijiang Shipbuilding: Robust Margins, Bullish Order Outlook, and Peer Analysis Signal Strong Upside for 2025

Yangzijiang Shipbuilding Surges Ahead: Margins and Orders Exceed Expectations

Yangzijiang Shipbuilding (YZJSB) has delivered a stellar first half for 2025, defying industry headwinds and surpassing analyst forecasts. With a gross margin surprise, positive customer sentiment, and a record pipeline of new orders, YZJSB is positioned as a standout in the global shipbuilding sector.

1H25 Financial Performance: Margins Outperform on Lower Steel Costs

1H25 net profit reached Rmb4.18bn, forming 60% of CGS International’s full-year forecast and 57% of Bloomberg consensus.
Revenue for the period was Rmb12.8bn, in line with expectations at 45% of the FY25 forecast.
The shipbuilding gross margin soared to 35%, well above the estimated 29%, primarily due to lower steel prices.
YZJSB delivered a total of 23 vessels in 1H25, including 4 from its Yangzi-Mitsui joint venture.
Share of profits from associates rose sharply to Rmb481m, up 79% year-on-year, driven by successful execution of gas carrier projects.

Upward Revision of Gross Margin and EPS Guidance

Shipbuilding gross margin forecasts for FY25-26 have been revised up to 30-32% (from 29-29.7%) to reflect the strong start to the year.
Management anticipates a slight moderation in 2H25 margin, as more lower-margin oil tankers are scheduled for delivery.
The Chinese government’s plan to reduce steel output may lead to modest increases in steel costs in 2H25.
FY25-27 EPS forecasts have been raised by 4-15% due to higher margins and order wins.

Order Book and New Orders: Momentum Returns as Trade Tensions Ease

Order book stood at US$23.2bn as of June 2025.
Year-to-date order wins are approximately US$740m.
The company currently holds letters of intent (LOIs) worth around US$2bn, awaiting final confirmation.
FY25 order win assumption has been raised to US$3.7bn.
Strong demand is seen for small to mid-sized containerships (<5,000 TEU) for delivery in 2028/2029. Yard capacity supports sustainable order wins of US$4.5bn per annum, with previous expansion plans now shelved.

Strategic Positioning and Dividend Policy

YZJSB is well-placed to cherry-pick higher ASP orders, as most of its yards are fully booked into 2027.
The company will charter out its first LNG carrier as an industry proof of concept.
Dividend payout ratio is maintained at 30-40%.

Valuation and Target Price Upgrade

Target price raised to S$3.90 (from S$2.72), based on 10x CY26F P/E, reflecting a 55% discount to larger Chinese/Korean peers.
Current share price is S$2.63, implying a potential upside of 48.3%.
Major shareholders include Yangzi International Holdings Ltd (21.5% stake).
Dividend yield is expected to reach over 6% by 2027.

Key Risks and Catalysts

Upside catalysts: Fading trade tensions, stronger-than-expected margins and orders.
Downside risks: Order cancellations, sharp increases in steel costs.

Operational and Market Trends: Delivery, Pricing, and Order History

YZJSB delivered 23 vessels in 1H25, aiming for a total of 56 in 2025.
Newbuild prices for small/medium containerships have remained stable year-over-year.
Yearly order wins averaged US$7bn from FY20-FY24, a significant jump from the US$1.4bn average in FY09-FY19.
Historical delivery figures highlight consistent operational execution and growing capacity utilization.

Comprehensive Peer Comparison: How YZJSB Stacks Up

YZJSB’s forward P/E (7.3x for CY25F) is well below the simple averages for Chinese and Korean shipbuilders, highlighting relative valuation upside.
YZJSB’s ROE and dividend yields are industry-leading.
Most global peers trade at higher P/E multiples, but with lower returns and yields.

ESG Considerations: Improvements and Controversies

YZJSB’s LSEG ESG combined score is C-, with Environment, Social, and Governance all at C-.
The score was impacted by a 2019 anti-graft investigation involving the former Executive Chairman and a S$1.09bn arbitration case in 2024.
Most claims in the arbitration were dismissed in March 2025, with minor financial impact.
YZJSB is pursuing “Green Vessel” and “Green Factory” strategies, aiming for carbon neutrality and higher energy efficiency.
74% of its order book are green vessels as of June 2025.
No ESG premium or discount has been applied to its valuation.

Key Financial and Operating Metrics

Net cash per share is forecast to increase from Rmb2.78 in Dec-23 to Rmb10.83 in Dec-27.
Book value per share (BVPS) is set to rise steadily to Rmb10.59 by Dec-27.
Operating EBITDA margin is projected to stay above 30% through 2027.
ROE remains robust, peaking at 28.1% in Dec-24 and holding above 20% through 2027.
Dividend payout ratio expected at 39% from FY25 through FY27.

Conclusion: Investment Case for Yangzijiang Shipbuilding

Yangzijiang Shipbuilding stands out as one of the most attractive investments in the offshore & marine sector for 2025 and beyond. The company’s strong balance sheet, high margins, growing order book, and disciplined capital return policy underpin a compelling value proposition. With a considerable valuation discount to global peers, robust dividend yield, and sustained operational execution, YZJSB is well-positioned for further upside as trade headwinds subside and demand for green vessels accelerates.
Investors should remain mindful of sector risks, including order cancellations and steel price volatility, but the overall outlook for YZJSB remains highly positive in the current market environment.