CLSA says Chinese shipyards’ stellar performance in 2010 will be hard to beat, “and we are cautious into 2011 given the unfavourable bias (relative to the Chinese) towards large containership orders and rising cost inflation.” 

The house prefers Cosco (F83.SG) over Yangzijiang (BS6.SG) “as Cosco makes further inroads into the offshore sector while YZJ faces delays.” It says more switching from YZJ into Rongsheng (as it comes out of listing blackout) is possible given the valuation gap between the two. 

 

It upgrades YZJ to Underperform from Sell and ups the target to $2.20 from $2.05 after revising up FY11-12F earnings forecast by 14%-24%, reflecting a more gradual decline in margins; but it retains negative stance “as YZJ needs time to scale the large container learning curve.” 

 

It says Cosco remains top pick as the company is better positioned thanks to its SOE parentage and exposure to the less competitive offshore sector; keeps at Buy and raises the target to $2.60 from $2.25.