Felicia Tan Published on Fri, Jul 02, 2021
Analysts from CGS-CIMB Research and UOB Kay Hian remain positive on Yangzijiang after the Mainboard-listed shipbuilding company announced its order win of US$871 million ($1.17 billion) on June 30, one week after it secured US$715 million worth of new orders.
CGS-CIMB analyst Lim Siew Khee has kept “add” on the counter with an unchanged target price of $1.63 while UOB Kay Hian analyst Adrian Loh has maintained his “buy” call with a higher target price of $1.90 from $1.76 previously.
To Lim, the group has “struck gold” but remains an unappreciated counter.
The new wins are close to her shipbuilding gross margin (GM) forecast of 17% to 20% for the FY2021-FY2022, notes Lim.
As at June 25, the Shanghai Containerised Freight Index (SCFI) reached 3,785 points.
“[With] the latest orders for Yangzijiang… shipowners could be taking a bullish view on freight rates in the medium term,” writes Lim in a June 30 report.
The near-term container market outlook also remains “firmly positive”, according to Clarksons Research. This is due to the “robust trade and ongoing logistical disruption and port congestion, against the backdrop of manageable supply growth through to 2022.”
To-date, Yangzijiang’s order wins have already exceeded the group’s guidance and Lim’s expectations of US$5 billion.
“We see earnings upside for FY23 earnings if the momentum continues into 2022. We have factored in US$2.5 billion for 2022,” she says.
Stronger orders for the group could serve as a share price catalyst, while a sharp appreciation of the Chinese renminbi and steel costs, as well as order cancellations, may pose downside risks, adds Lim.
UOB Kay Hian’s Loh has, too, increased his earnings forecast for Yangzijiang by 2% to 11% for the FY2021-FY2023.
This, he says, takes into account the group’s order wins from June 23 and 30.