Towards Financial Freedom
Yangzijiang - 2Q13 Results Outperform On Higher HTM Income
Yangzijiang (YZJ)'s 2Q13 earnings of CNY812m were 8% weaker y-o-y due to a lower shipbuilding margin, but the results beat our expectations owing to stronger held-to-maturity (HTM) income. We raise our FY13F-FY14F EPS by 9%-14% as we now expect a slower decline in HTM investments. We remain NEUTRAL amid improving ship demand vis-à-vis still-weak pricing, with our revised TP at SGD1.00.
- HTM income higher than forecast. YZJ's 2Q13 net profit fell 8% y-o-y to CNY812m, mainly owing to shipbuilding margin shrinking from 24.2% in 2Q12 to 20.6% in 2Q13. Its 1H13 net profit of CNY1.53bn made up 56% of our forecast. In 2Q13, the company's shipbuilding revenue rose 12% y-o-y, or 63% q-o-q, thanks to its recognition of larger vessels and higher contribution from its ship-breaking business (+61% y-o-y).
- Confidence in winning more orders. YZJ has a net orderbook of USD3.24bn comprising 29 container ships and 42 bulk carriers. YTD, it has secured USD1.01bn in new orders for 27 ships, and Management is confident of winning another USD1.0bn-USD1.5bn for 2H13. We think this is achievable as YZJ has 47 options valued at USD2.54bn with various buyers, which we expect will translate into firm orders.
Source: OSK
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