Brokers’ take: CGS-CIMB expects Yangzijiang margins to improve as ship prices rise, steel falls
RISING ship prices and a downtrend in steel prices could help Yangzijiang Shipbuilding : BS6 0%’s margins improve in FY2024-25, CGS-CIMB said on Wednesday (Sep 20).
The research team, citing Bloomberg, said global newbuild containership prices have increased by around 30 per cent since May 2021, while steel prices have retreated by about 40 per cent.
It raised its target price on Yangzijiang to S$1.96 from S$1.87 and maintained its “add” call on the counter.
The new target is a 50 per cent premium to the group’s average price-to-book value for the 2023 calendar year for regional yards, after taking into account the group’s “superior margins and return on equity”, CGS-CIMB said.
The research team visited the group’s New Yard and Xinfu Yard in Jiangyin on Tuesday and noted that since its previous visits in 2008 and 2013, the group has climbed up the shipbuilding value chain.
“(It) now builds large-scale vessels with systematic yard workflows,” CGS-CIMB added.
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It now expects some 23 per cent to 24 per cent in gross profit margins for FY2024-25, compared with 21 per cent previously, as the group progressively executes orders from the second half of 2021 – when ship prices just started to turn positive.
The research team is also projecting around US$1 billion to US$1.5 billion of orders in the second half of 2023.
Shares of Yangzijiang were trading 4.2 per cent or S$0.07 higher at S$1.74 as at the midday trading break on Thursday.
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