DMG Research, Sept 12
WE upgrade Yangzijiang Shipbuilding (YZJ) from "neutral" to "buy", with a higher target price of $1.31 versus $1.00 previously. In our view, the shipbuilding capacity cut in China and the recovery of ship orders in the dry bulk sector arising from improved supply and demand will drive the stock's re-rating.
The Baltic Dry Index (BDI) jumped 120 per cent YTD and 54 per cent in the past month due to slower supply growth while demand remains steady. Ship prices have risen by 5-12 per cent from the bottom six months ago, and seasoned shipping players are expanding their fleets aggressively.
Our analysis shows that global dry bulk demand will start outpacing supply by early 2014. We believe the recovery in ship orders and closure of inefficient yards in China will benefit YZJ.
BUY
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