Yangzijiang Shipbuilding poised to ride clean energy wave—DBS

Its pivot towards cleaner vessels is a key catalyst.

Yangzijiang Shipbuilding improving corporate governance and pivot towards cleaner vessels such as dual-fuel containerships and gas carriers, which now account for 70% of its orderbook, could draw more interest from ESG funds, a DBS report said.

DBS said securing more orders for LNG carriers allows Yangzijiang to scale up and strengthen its market positioning. The LNG carrier market has high technical barriers to entry and could be a significant growth opportunity for Yangzijiang. The market has yet to fully appreciate the potential for earnings growth from its record-high order backlog as well as potential yard expansion of 20% to 30%.

Yangzijiang has an orderbook worth $24b. CAGR of earnings is expected to reach 14% in the next two years, driven by both revenue growth and margin expansion, as 65% of its orderbook is made up of containership orders that command higher value and margins.

A key risk for the company is that since its revenue is in US dollars, a weak USD could see earnings drop by about 1.5% for every 1% decline in USD. Another risk is the increase in the cost of steel. Steel makes up 20% of production costs. If steel prices go up by 1%, earnings could fall by 0.7%.