Merely six days after announcing a US$715m order win, Yangzijiang Shipbuilding (SGX:BS6) has topped that with yesterday’s announcement of US$871m worth of orders, which brings its year-to-date order wins to a record US$5.59b in 2021. Containerships continue to comprise the bulk of these orders, and we note that delivery dates for the larger vessels are being pushed to 2024.
We maintain our BUY rating for Yangzijiang Shipbuilding, as we believe the containership construction upcycle remains intact, and have upgraded our target price for Yangzijiang Shipbuilding to S$1.90 (previously S$1.76).
What’s New
Yesterday, Yangzijiang Shipbuilding announced new orders worth US$871m comprising:
six 15,000TEU containerships,
three 3,300TEU containerships, and
two 82,300DWT bulk carriers.
It was notable that the ultra-large 15,000TEU containership order came from Seaspan, which is one of Yangzijiang Shipbuilding’s oldest clients.
Delivery dates are being pushed out.
As can be seen by the delivery date of 1H24 for these vessels, Yangzijiang Shipbuilding has ‘run out of room’ for delivery in 2023, especially for the ultra-large containerships. Even the smaller 3,300TEU containerships, which were ordered by a domestic China-based shipowner, have delivery dates starting from 2H23 and into 1H24.
On the other hand, bulk carriers that are easier and faster to construct can still be delivered in 1H23.
A record year.
Year-to-date order wins for Yangzijiang Shipbuilding now total US$5.59b for 100 win expectation to US$6.5b for 2021 and US$4.0b for 2022 (previously US$3.5b).
Yangzijiang Shipbuilding’s orderbook now stands at US$7.72b for 160 vessels.
The containership upcycle appears sustainable
The containership upcycle appears continue to flow to shipbuilders in 2021 and 2022.
Stock Impact
Apart from yesterday’s large order, Yangzijiang Shipbuilding announced a similarly large order merely six days ago for 14 vessels worth a total of US$715m. The order comprised one 9,150DWT chemical tanker, one 29,800DWT self-loading bulk carrier, two 2400TEU containerships, five 3500TEU containerships, two 11,800TEU containerships, and three 40,000m3 LPG vessels.
Unfortunately Yangzijiang Shipbuilding was less specific with delivery dates, only disclosing that deliveries will be between 2022-24.
We were certainly heartened to note that Yangzijiang Shipbuilding continues to win orders for containerships which are relatively higher-margin vessels for the company. Importantly, the company won an order for LPG vessels, which is a first for the company, and is thus encouraging to see it breaking into a new market segment.
Increased levels of scrapping.
Small and medium-sized containerships have note from Yangzijiang Shipbuilding’s orderbook for containerships that it has seen meaningful order flow for both the small and large vessels.
Earnings Revision / Risk
Upgrading earnings for 2021-23.
We have raised our earnings forecasts for Yangzijiang Shipbuilding by 2-11% for 2021-23F to take into account yesterday’s order wins as well as the order wins garnered by the company last week.
Valuation / Recommendation
Maintain BUY on Yangzijiang Shipbuilding with an view, especially given our expectation for the company to experience ROE expansion from 9.1% in 2021 to 13.3% in 2023.
Recent share price retracement is an opportunity, in our view.
Since the beginning of May 21, Yangzijiang's share price has fallen ~8% from more order wins to come in our view.
Share Price Catalyst
Continued new order wins, especially from China-based clients.
