Yangzijiang Shipbuilding (YZJ) reported an 11% YoY fall in revenue to RMB2.7b and a 36% drop in net profit to RMB448m in 1Q16, accounting for 18% of both our full year top and bottomline estimates; hence below expectations.

Shipbuilding revenue was 13% lower as vessels delivered in the quarter were relatively smaller in terms of vessel size; interest income from the group’s held to maturity assets was also lower at RMB200m vs. RMB266m in 1Q15, due to the reduced investment portfolio size.

The group has been faring relatively well despite the poor industry dynamics, but it is also hard to beat the tide. As the stock is already up 13% from its low of S$0.88 in mid Jan, we put our Buy rating and fair value estimate of S$1.06 under review, pending an analyst briefing later.

Source: OCBC Research - 29 Apr 2016