Yangzijiang Shipbuilding (YZJ) reported a 15% YoY rise in revenue to RMB6.4b and a 12% increase in net profit to RMB678m in 4Q17, bringing full year net profit to RMB2.9b, accounting for 93% and 123% of ours and the street’s full year estimates, respectively. Bottomline was impacted by impairments of RMB236m, largely due to held-to-maturity assets. As such we judge this set of results within our expectations but better than the street’s.

Shipyard gross margin was 10.5% in 4Q17 compared to 10.9% in the previous quarter. In 2017, the group secured new orders for 74 vessels worth US$2.1b, vs. 19 vessels worth US$0.8b in 2016. A dividend of 4.5 S cents has been declared, compared to 4.0 S cents a year ago.

Currently, the stock is trading at about 12.7x cons. forward P/E and 1.1x forward P/B, which seem fair, in our view. Pending an analyst briefing later, we maintain our HOLD rating but put our fair value estimate of S$1.63 under review.

Source: OCBC Research - 1 Mar 2018