DBS Group Research analyst Ho Pei Hwa has lowered her target price (TP) for Yangzijiang Shipbuilding (Yangzijiang) to $1.38 from $2.15 previously while maintaining her “buy” call, as she believes the company is trading at an “unwarranted deep discount” to its peers.
Although Yangzijiang’s earnings and margins had “hit a bottom” in 2HFY2021, Ho estimates its 1HFY2022 earning to grow 20% year-on-year (y-o-y), with shipping rates expected to improve as they enter peak season in 3QFY2022, with demand and freight rates expected to “improve sequentially”.
“Yangzijiang’s shipbuilding related business generated about RMB1 billion ($200 million) net profit in each of 1H2021 and 2H2021 last year. We expect the company to report net profit of at
least RMB1.2 billion for 1HFY2022, on revenue growth. We see room for upside surprise and earnings upgrade post results,” says the analyst.