Improved earnings visibility in 2010. We have previously expected a sharp dip in 2010 earnings in anticipation of high cancellation/rescheduling of order book in 2009. As the jittery is soothed with no cancellation and relatively low deferment to date, we increase our 2010 delivery assumption from 30 to 40 vessels. Gross margin has also been lifted by 2.7ppt to 20% on better operational efficiency. As a result, our FY10 net profit estimate is raised by 50% to RMB1.8bn.
One of the few privileged yards supported by government’s stimulus package. Yangzijiang is one of the three private yards in Jiangsu province that is singled out under the government’s stimulus package. The funding access given to Yangzijiang and its foreign customers reduces ship owners’ default risk and enhances Yangzijiang’s financial capability to pursue M&A opportunities.
The listing of CSIC may provide potential price catalyst to Yangzijiang. China Shipbuilding Industry Co (CSIC), one of the largest shipyards in China, has obtained approval from securities regulatory to list in the A-share market last week. A successful launch of CSIC at good valuation could drive up the values of Chinese shipbuilders, which now trade at an average 16.6x FY10 PE. This could result in a re-rating of Yangzijiang.
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