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1Q14 – An Inflexion Point For Yangzijiang?
Tradeable, Tradeable Ideas | 07 May 2014
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By: Raymond Leung
Articles (142) Profile
  1. 1Q14 results were encouraging as YZJ beat consensus estimates. Improved profit margins from its shipbuilding business and gains from investments helped its bottomline figures.
  2. Outlook for YZJ looks relatively optimistic after the company won US$1.07 billion worth of contracts. Its order book now stands at US$5.2 billion.
  3. Tax rebates by the Chinese government is also expected to boost its more immediate financial performance.

Table compiling updates by analysts on Yangzijiang Shipbuilding
Table compiling updates by analysts on Yangzijiang Shipbuilding

Recently, Yangzijiang Shipbuilding (YZJ) reported its 1Q14 results which were encouraging. YZJ’s 1Q14 managed to beat consensus estimates with an increase in revenue of 24 percent and an 11 percent increase in net profit.

The better results was mainly contributed by a higher profit margin from its shipbuilding business and gain from its investments. However, a setback presented itself as two semi-submersible contracts were cancelled by its customer due to difficulty in securing financing.

Outlook for the firm remains optimistic as YZJ won US$1.07 billion worth of orders in 1Q14 bringing the value of its order book to US$5.2 billion.

The group’s shipyards are currently fully utilized, limiting YZJ’s capability of taking up projects. In view of its limited capacity, YZJ’s management has been careful in selection of its projects which focuses more in quality than quantity.

YZJ is expected to enjoy tax rebates as the government labeled the firm as a new/high tech enterprise. They will enjoy a preferential tax rate of 15 percent from the previous 25 percent.

Analysts expect a tax credit of approximately CNY$350 million to be credited to the company by 2Q14.

Based on the report by OCBC Research, YZJ presents certain value after its relatively weak stock performance since the beginning of this year.

With the possible turnaround in the industry and strong order book, the company was given a “Buy” call with an average potential upside of 12.9 percent.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

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Yangzijiang Shipbuilding (Hldgs)  1.080 -0.040 -3.57%   
Business: Co is one of the largest non-state owned shipbuilders in China. [FY18 Turnover] Shipbuilding (58.1%), trading (32.8%), investments (6.7%), others (2.4%).

Insight: Apr-19, 1Q19 revenue jumped 26.8% to Rmb6.3b due t... Read More

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