Yangzijiang Shipbuilding (YZJ) reported a 3% YoY fall in revenue to RMB4.3b but a 52% increase in net profit to RMB1.24b, such that 2Q14 revenue and net profit accounted for about 55% and 63% of our full-year forecasts, respectively. Excluding a one-off tax credit of RMB349m in 2Q14, core net profit accounted for about 52% of our full year estimate. Gross profit margin in the quarter remained healthy at 27.7% vs. 27.5% in 2Q13.

According to the group, YZJ has won the most new orders among all the Chinese yards since the start of this year. Looking ahead, the group intends to refocus on its core shipbuilding business and redirect resources from its non-shipbuilding businesses. Pending an analyst briefing later in this morning, we put our Hold rating and fair value estimate of S$1.04 under review.

Source: OCBC Research - 6 Aug 2014