• Yangzijiang’s 2Q18 figures beat expectations on strong shipbuilding earnings.
• Core shipbuilding margins expanded 4.2ppts q-o-q to 21.5% aided by deliveries of 10 higher-margin, large vessels.
• Order wins could exceed target; raise FY18/19 profits to Rmb2.8bn.
• Reiterate BUY; undervalued at trading near net cash levels; Target Price S$1.82.

Reiterate BUY; Target Price Unchanged at S$1.82

Yangzijiang is a steal, trading near net cash (including HTM investments) of 91 Scts, undervalued at 0.7x P/BV, a 20% discount to global peers, notwithstanding its more attractive 10% ROE and 5% yield.

The astounding 2Q profit soaring 67% q-o-q serves as a confidence booster on Yangzijiang’s shipbuilding profitability. It is a prime beneficiary of stronger USD and among the best proxies for shipping and shipbuilding recovery.

Source: DBS Research - 10 Aug 2018