Tuesday, August 20, 2013

Yangzijiang 2Q13 inline; order momentum improving (CS)

Yangzijiang Shipbuilding (Holdings) Ltd
Maintain NEUTRAL
Price (06 Aug 13 , S$) 0.93
TP (prev. TP S$) 1.10 (1.10)
2Q13 inline; order momentum improving

● 1H13 net profit of Rmb1.52 bn was in line with our expectation, representing 55% of our FY13 forecast. Shipbuilding revenue increased to Rmb4.04 bn from Rmb2.47 bn in 1Q13, while gross margin declined to 21% in 2Q13 from 26% in 1Q13, due to recognition of lower priced contracts.

● Held-to-maturity (HTM) financial assets increased to Rmb12.2 bn from Rmb11.6 bn at the end of 1Q13. Interest income was steady at Rmb383 mn in 2Q13 from Rmb394 mn in 1Q13.


● Yangzijiang has secured US$1.1 bn of contracts year-to-date, including 27 shipbuilding contracts worth US$1.01 bn in 1H13, as well as four options worth US$104 mn exercised in July 2013. In addition, the company has 47 remaining options worth US$2.54 bn, which management are confident will be partially exercised in 2H13. We raise our 2013 new order forecast from US$1.5 bn to US$2.0 bn, which leads to a 4% rise in 2014 EPS.

● Given the aggressive competition in the offshore market, management focus will be on building up track record rather than to gain further offshore orders. Maintain NEUTRAL

2Q13 net profit in line
1H13 net profit of Rmb1.52 bn was in line with our expectation, representing 55% of our FY13 forecast and 56% of consensus FY13 forecast. Shipbuilding revenue increased to Rmb4.04 bn in 2Q13 from Rmb2.47 bn in 1Q13 due to an increase in vessels delivered from nine in 1Q13 to 11 in 2Q13, as well as more larger vessels constructed in 2Q13. However, the shipbuilding segment gross margin declined to 21% in 2Q13 from 26% in 1Q13 and 24% in 2Q12 due to recognition of lower priced contracts in its orderbook.

Held to maturity assets increased
Interest income was steady QoQ at Rmb383 mn (vs Rmb394 mn in 1Q13), including Rmb361 mn from HTM investment and Rmb22 mn from micro-finance. HTM financial assets increased to Rmb12.2 bn from Rmb11.6 bn at the end of 1Q13.

Recovery in orders and slowdown in order cancellations
Yangzijiang has secured US$1.1 bn of contracts year-to-date. This includes 27 shipbuilding contracts worth US$1.01 bn in 1H13, as well as four options worth US$104 mn exercised in July 2013. In total, the company has secured contracts for two 94,000 DWT bulk carriers, thirteen 82,000 DWT bulk carriers, ten 64,000 DWT bulk carriers, two 36,000 DWT bulk carriers, and four 10,000 TEU containerships. In addition, Yangzijiang has 47 remaining options worth US$2.54 bn secured, including 22 options for containerships worth US$1.56 bn and 25 options for bulk carriers worth US$0.98 bn. Management are confident that more options will be exercised in 2H13.

The three 2,500 TEU contracts which were cancelled earlier have been sold to an existing customer with four outstanding containership orders. As part of the transaction, one of the four containership contracts has been ceased. Management expects lower risk of further cancellations in 2H13.

Update on offshore segment
Construction of Yangzijiang’s first jackup rig will begin in August 2013, with initial revenue recognition likely in 1H14 and delivery in mid-2015. Given the aggressive competition for newbuild contracts, management focus will be on building up track record rather than to gain further offshore orders in the near term.


Source/Extract/Excerpts/来源/转贴/摘录: Credit Suisse
Publish date: 12/08/13

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