• We were surprised by Yangzijiang Shipbuilding’s record delivery of 20 vessels in 2Q18. Group revenue of Rmb7.9bn was 60% higher than our expectations.
• Yangzijiang Shipbuilding’s 2Q18 net profit of Rmb994m exceeded our Rmb720m forecast. 1H18 net profit of Rmb1.6bn formed 62% of our FY18F and 68% of consensus.
• Shipbuilding margin of 21% was broadly in line with our expectation of 20%. There were 10 large vessels that were part of the delivery.
• Earnings were also boosted by some one-offs - Rmb101m forex gain, impairment losses of trade/other trade receivables (Rmb229m) and HTM (Rmb133m).
• Maintain ADD. Yangzijiang Shipbuilding proved that it is set apart from Singapore peers and did not need HTM income to outperform. Our SOP Target Price is up slightly to S$1.29 (from S$1.27).

Source: CGS-CIMB Research - 08 Aug 2018