Yangzijiang Shipbuilding (YZJ) saw a 27% YoY rise in revenue to RMB3.8b and a 73% increase in net profit to RMB720m in 2Q17, such that 1H17 net profit of RMB1.4b accounted for 55% of our full year forecast, in line with our expectations. This was, however, higher than the street’s expectations (1H17 was 67% of Bloomberg FY17F consensus of RMB2.1b).

Gross profit margin from the shipbuilding-related segment was 13.7% in 2Q17 vs. 15.9% in 2Q16 and 15.3% in 1Q17. On a group basis, overall gross margin was 21.2% in 2Q17 vs. 22.9% in 2Q16.

Meanwhile, a shipbuilding order for one 82000 DWT bulk carrier was terminated in 2Q17. In 1H17, the group secured new orders of US$450m. In comparison, new orders for 2016 and 2015 were US$820m and US$2.25b, respectively.

Prior to this set of results, we had a HOLD rating, and our fair value estimate of S$1.18 is under review pending an analyst briefing.

Source: OCBC Research - 8 Aug 2017