- Record New Orders: YZJ Shipbuilding achieved a record high of US$14.3 billion in order wins by early December 2024.
- Capacity Expansion: New yard in Xinqiao Park, part of the Jingjiang Economic and Technological Development Zone, is expected to be operational in 2026.
- Inclusion in MSCI Singapore Index: YZJ Shipbuilding’s inclusion from November 25, 2024, may attract new investors.
Yangzijiang Shipbuilding (Holdings) Ltd (SGX:BS6) (YAZG.SI) has firmly anchored its success with impressive order wins and deliveries scheduled until 2029. Additionally, YZJ Shipbuilding’s superior return on equity of 27% compared to Chinese peers’ 4% makes it an attractive investment.
Leading the Straits Times Index (STI) in 2024, YZJ Shipbuilding achieved total returns of 108.3%, significantly outpacing the STI’s own impressive 23.5% return. Since the beginning of 2017, YZJ Shipbuilding’s share price has risen over seven-fold to S$2.99 by the end of 2024.
YZJ Shipbuilding is a large private shipbuilding company in China, headquartered in Jiangsu Province. The company constructs a wide range of vessels, including containerships, bulk carriers, and LNG carriers. Its clientele includes major global shipping companies such as Maersk and Ocean Network Express (ONE).
YZJ Shipbuilding is set to report its FY2024 financial results on February 27, 2025, and strong results are expected due to several factors.
FY2024 Financial Outlook
- Robust Deliveries: YZJ Shipbuilding delivered 64 vessels during the year, surpassing its target of 63 vessels and 2023 deliveries of 57 vessels. High-margin containerships made up 58% of these deliveries, while bulk carriers accounted for 38%.
- Favorable Forex Trends: The weakening of the Chinese currency (Rmb) against the US dollar is likely to boost the company’s revenue and profit margins.
- Strong Order Momentum: YZJ Shipbuilding won orders for approximately 70 new containerships and secured its first orders for Very Large Ethane and Ammonia Carriers (VLEC, VLAC).
- Lower Material Costs: Steel prices fell by 9% on average in 2024 compared to 2023. Steel accounts for 25-30% of the costs for containerships and bulk carriers for YZJ Shipbuilding.
Key Catalysts to Watch
- Future Order Wins: Management has guided for more than US$4.5 billion in new orders for FY2025, up from US$3 billion. YZJ Shipbuilding achieved a record high of US$14.3 billion in order wins by early December 2024.
Yangzijiang Shipbuilding Order Win Trend
Data as of December 2024
- Capacity Expansion Updates: Updates on the company’s new yard at Xinqiao Park, expected to be operational by 2026, will support its ambitious order win targets.
- Fleet Renewal and Decarbonization: Firm freight rates continue to support shipowners’ ongoing fleet renewal programs and decarbonization trends. Clarksons data as of December 2024 shows that containership freight rates rebounded by 19% since October 2024 following weakness in 3Q2024.
- Inclusion in MSCI Singapore Index: Yangzijiang Shipbuilding’s inclusion in the MSCI Singapore Index from November 25, 2024, is expected to attract new investors and boost its market visibility.
Potential Risks
- Order Cancellations: There is a risk of order cancellations, which could impact YZJ Shipbuilding’s financial performance.
- US Policy Actions: Unfavorable US policy actions against the Chinese shipbuilding industry by the newly elected US government could pose a risk to the company’s operations and profitability.
- Rising Steel Costs: A surge in steel costs could affect margins, given that steel accounts for a significant portion of shipbuilding costs.
Conclusion
YZJ Shipbuilding presents a promising investment opportunity with strong financial performance and growth prospects. However, investors should be aware of potential risks, including order cancellations and geopolitical factors. Overall, YZJ Shipbuilding’s robust orderbook, capacity expansion plans, and favorable economic conditions make it a stock worth considering.
References
CGSI | YZJ Shipbuilding | Jan 7, 2025
CGSI | YZJ Shipbuilding | Dec 2, 2024
Disclaimer: ProsperUs Manager of Content, Hailey Chung, does not own shares of the company.
