Deutsche Bank has upgraded Yangzijiang Shipbuilding (BS6.SG) to “buy” from “sell” following 4Q09 results on back of earnings upgrades and attractive valuation.

The broker says FY09 results were robust and ahead of forecast.

“Yangzijiang has executed well, differentiating itself from other Chinese companies with its on schedule deliveries, conservative accounting and good planning.”

Deutsche believes new ship demolition business looks promising with activity likely to be driven by ship owners scrapping old vessels to make way for new ones being built.

Upgrades FY10, FY11 earnings forecasts by 7.2%, 8.4%, respectively, to reflect new business in ship demolition and stable delivery of current order book, raising target price to $1.50 from 74 cents.

Says valuation looks attractive vs Chinese peers with Yangzijiang trading at 50% discount on FY10 P/E.

Yangzijiang is up 3 cents to $1.15.