What You Need to Know About YZJ Shipbuilding's Half-Year Earnings?
$YZJ Shipbldg SGD (BS6.SG)$ is a Chinese large conglomerate, with shipbuilding and offshore engineering as its core focus. Riding the wave of a buoyant shipbuilding industry, the company has seen its stock price soar by 82% since the beginning of the year. According to Bloomberg data, the company is set to disclose its half-year earnings report on August 14th.
According to Moomoo, market expectations for the first half year of 2024 financial performance of the company are as follows:
• The company is projected to achieve a revenue of 13,59 billion CNY, representing a year-over-year increase of 20.00%.
• Consensus adjusted net income is 2.16 billion CNY, an increase of 24.91% compared to the same period in the previous year.
• The average price target for YZJ Shipbuilding is S$2.65, suggesting a potential increase of 6.85%.
Robust Order Growth
The shipbuilding sector has embarked on an upward trend this year. On one hand, the industry is experiencing a replacement cycle coupled with stricter environmental policies, leading to tight production capacity on the supply side. On the other hand, ongoing geopolitical tensions in the Middle East have extended global shipping routes and reduced efficiency, which in turn has increased the demand for vessels.
As a leading shipbuilder, Yangzijiang Shipbuilding boasts a robust order book, providing solid support for its financial performance. As of May 24, 2024, the company has announced a total of $3.3 billion in orders, nearing three-quarters of its annual target.
Further Capacity Expansion
On July 15, Yangzijiang Shipbuilding disclosed plans for a substantial expansion by investing in approximately 1,300 mu (866,671 square meters) of land in Jiangsu Province. The leading shipbuilder has earmarked roughly RMB 3 billion (about $550 million) for capital expenditures over the forthcoming two years to develop the new facility. The strategic investment aims to bolster the company's capacity for constructing vessels powered by liquid natural gas and other clean energy sources, reflecting a forward-thinking approach to environmental sustainability in maritime operations.
Analysts Lim Siew Khee and Meghana Kande from CGSI project that the new yard could contribute significantly to the group's output, with the potential to deliver five to six vessels per annum, translating to approximately $850 million to $1 billion in orders. The new site is anticipated to be 60% the size of the group's current Jiangsu Yangzi Xinfu yard, known for its specialization in mid-to-large-sized vessels.
Anticipated Increase in Profitability Levels
The first half of this year has witnessed a continued rise in global shipbuilding prices, while the cost of steel—a key material in ship construction—has trended downward. This combination has laid the groundwork for shipbuilding firms to expand their profit margins. Analysts at JP Morgan are predicting what they refer to as a "sweet spot" in earnings for the shipbuilding industry, driven by this margin expansion.
Benefiting from a favorable delivery mix, stable steel costs and foreign exchange (US dollar versus the Chinese renminbi) effects, we forecast Yangzijiang Shipbuilding's net profit after tax (NPAT) to reach a historical high in 1HFY2024 led by shipbuilding margin expansion.
Analysts' Opinions
With robust margins and a solid track record of order acquisitions, analysts are expressing a sunny outlook for Yangzijiang Shipbuilding. Industry experts from CGS, Citi, and UOB Kay Hian are consistently maintaining a "Buy" or "Add" rating for the company.
DBS Bank has escalated its target price for Yangzijiang to S$2.75. The revised target price is predicated on a higher valuation multiple of 2.3 times price-to-book (P/B) ratio, which aligns with the company's historical tendency to trade at a 20% premium compared to the industry average, justified by Yangzijiang’s superior return on equity, attractive yield, and strong financial performance.
We believe there are more legs to the rally in view of the robust order flow amidst a multi-year shipbuilding upcycle, translating to double-digit earnings growth for the next few years boosted by potential capacity expansion.
Source: The Edge, Bloomberg
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
Read more
Comment
Sign in to post a comment
