Credit Suisse raises Yangzijiang Shipbuilding (BS6.SG) target to $2.40 from $2.20 on 14X 2011E P/E, in line with the sector and keeps an Outperform call.

“The market is underestimating Yangzijiang’s growth potential...despite rising 63% in 2010, Yangzijiang should continue to outperform the market...as order intake grows strongly in 2011 and margins remain resilient.” 

 

The house raises its 2011 order forecast to US$2 billion ($2.6 billion) from US$1.5 billion and raises the 2012 forecast to US$3 billion from US$2 billion, saying YZJ “is the best positioned among Chinese yards to benefit from a recovery in containership orders as the largest containership producer in China with more than 10% market share.” 

 

The house adds, its recent MoU with Taiwan’s CSC should enable YZJ to scale the learning curve and construct 8,000 TEU containerships. Credit Suisse says the valuation is attractive: “Yangzijiang is one of the cheapest shipbuilding stocks globally, with a 2011 P/E of 11.4X, on a 16% net income CAGR over 2009-12E.” 

 

The stock is +1.6% at $1.97.