Yangzijiang Shipbuilding (YZJ) reported a 3% YoY fall in revenue to RMB4.3b but a 52% increase in net profit to RMB1.24b, such that 1H14 revenue and net profit accounted for about 55% and 63% of our full-year forecasts, respectively. Excluding a one-off tax credit of RMB349m in 2Q14, 1H14 core net profit accounted for about 52% of our full year estimate. To date, YZJ has secured better-than-expected new order wins of US$1.4b, comprising a total of 32 effective shipbuilding contracts. After tweaking our estimates (including a 9% rise in FY15F earnings), and rolling forward our valuations (9x blended FY14/15F earnings for the shipbuilding business), our fair value estimate rises from S$1.04 to S$1.21. Upgrade to BUY.
2Q14 boosted by one-off tax credit
Yangzijiang Shipbuilding (YZJ) reported a 3% YoY fall in revenue to RMB4.3b but a 52% increase in net profit to RMB1.24b, such that 1H14 revenue and net profit accounted for about 55% and 63% of our full-year forecasts, respectively. Excluding a one-off tax credit of RMB349m in 2Q14, 1H14 core net profit accounted for about 52% of our full year estimate. Gross profit margin in the quarter remained healthy at 27.7% vs. 27.5% in 2Q13, while gross profit margin for the shipyard business was 21.6% in the quarter vs 20.6% in 2Q13.
A rich man’s problem?
In its plans, YZJ has allocated a cash pile of ~RMB13b to its non-shipbuilding related businesses, of which the bulk is under financial investments and the rest under property development. Management is not keen to pay out a special cash dividend to shareholders, as it sees the need to hold significant cash to help attract new orders from customers that shy away from cash-poor shipyards. Yet management sees it as a “waste” to park the funds in low-yielding fixed deposits, and hence has invested in financial products such as held-to-maturity assets.
Shipyard continues to secure orders
To date, YZJ has secured new orders worth US$1.4b, comprising a total of 32 effective shipbuilding contracts. The group plans to deliver 30 vessels this year, and plans to ramp up to more than 50 vessels in 2015 as production capacity from the Xinfu and Changbo yards come online again. The group is also keen to penetrate the LPG carrier market, having come up with a new vessel design. Meanwhile, YZJ is keen to build up an experienced shipping team; its current fleet includes five 92,500DWT vessels under bareboat hire purchase and another five that are self-managed.
Bumping up FY15F estimates
Meanwhile, the group unwound a significant portion of its restricted cash in the quarter, paying back about RMB2b worth of debt and lowering its net debt position. After tweaking our estimates (including a 9% rise in FY15F earnings), and rolling forward our valuations (9x blended FY14/15F earnings for the shipbuilding business), our fair value estimate rises from S$1.04 to S$1.21. Upgrade to BUY.
Yangzijiang Shipbuilding (YZJ) reported a 3% YoY fall in revenue to RMB4.3b but a 52% increase in net profit to RMB1.24b, such that 1H14 revenue and net profit accounted for about 55% and 63% of our full-year forecasts, respectively. Excluding a one-off tax credit of RMB349m in 2Q14, 1H14 core net profit accounted for about 52% of our full year estimate. Gross profit margin in the quarter remained healthy at 27.7% vs. 27.5% in 2Q13, while gross profit margin for the shipyard business was 21.6% in the quarter vs 20.6% in 2Q13.
A rich man’s problem?
In its plans, YZJ has allocated a cash pile of ~RMB13b to its non-shipbuilding related businesses, of which the bulk is under financial investments and the rest under property development. Management is not keen to pay out a special cash dividend to shareholders, as it sees the need to hold significant cash to help attract new orders from customers that shy away from cash-poor shipyards. Yet management sees it as a “waste” to park the funds in low-yielding fixed deposits, and hence has invested in financial products such as held-to-maturity assets.
Shipyard continues to secure orders
To date, YZJ has secured new orders worth US$1.4b, comprising a total of 32 effective shipbuilding contracts. The group plans to deliver 30 vessels this year, and plans to ramp up to more than 50 vessels in 2015 as production capacity from the Xinfu and Changbo yards come online again. The group is also keen to penetrate the LPG carrier market, having come up with a new vessel design. Meanwhile, YZJ is keen to build up an experienced shipping team; its current fleet includes five 92,500DWT vessels under bareboat hire purchase and another five that are self-managed.
Bumping up FY15F estimates
Meanwhile, the group unwound a significant portion of its restricted cash in the quarter, paying back about RMB2b worth of debt and lowering its net debt position. After tweaking our estimates (including a 9% rise in FY15F earnings), and rolling forward our valuations (9x blended FY14/15F earnings for the shipbuilding business), our fair value estimate rises from S$1.04 to S$1.21. Upgrade to BUY.
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