Yangzijiang

UOBKayhian on 28 Feb 2014

FY14F PE (x): 8.0
FY15F PE (x): 6.8
4Q13 earnings declined 8% yoy on higher tax rate. 4Q13 revenue was Rmb3.38b (-5%
yoy), of which shipbuilding revenue was Rmb3.00b (-7% yoy). The decline in
shipbuilding revenue was a result of less vessels delivered (6 in 4Q13 vs 12 in 4Q12).
Overall gross margin (including investment business) improved to 42% from 4Q12’s 31%
due primarily to a surge in shipbuilding gross margin, which reached 43% in 4Q13
compared to 24% in 4Q12 and 24% in 3Q13. For container vessels that were delivered
in 4Q13, there was a write-back of an earlier 8% provision, and YZJ saved 2% in steel
cost, as a result of down-payment to steel suppliers. 4Q13 PBT increased 36% yoy to
Rmb1,355m. Effective tax rate soared to 46% in 4Q13 and 33% in 2013 from 16% in
4Q12 and 19% in 2012 respectively, due to a) expiry of tax holiday for New Yangzi; and
b) tax adjustment on the impairment provision of Rmb345,7m, resulting in an 8% yoy
decline. The 2013 full-year profit was Rmb3,077m, down 14% yoy, also dragged by the
increase of tax rate. YZJ proposed a final cash dividend of S$0.05 per share,
representing a consistent 30% dividend payout ratio.
Maintain BUY with target price of S$1.39 unchanged, based on 1.3x 2014F P/B. YZJ
has proven its leadership among non-SOE shipyards throughout the past years with its
strong order winning/project execution capability and robust balance sheet. Continuous
recovery in newbuild prices would be the major earnings driver in the long run.