YangZiJiang

YangZiJiang: UOB kay Hian note that latest results were encouraging. Rev was Rmb3686.3b (+12% yoy), of which shipbuilding revenue was 3,344.3m (+10% yoy). Overall gross margin (including investment business) recovered to 33.0% from 1Q11’s 32.3% due primarily to higher percentage of high margin investment business within revenue. Shipbuilding margin Net income was Rm1017.7b (+7% yoy) includes interest incomes of Rmb342m generated from held-to-maturity financial products, cash and Runyuan micro financing (1Q11: Rmb106m). In 1Q12, YZJ clinched orders of 7 bulk carriers for two Chinese shipowners, with value of US$206m. Orderbook declined to 96 vessels with a total value of US$4.5b. House Maintain BUY on YZJ and increase TP to $1.58 from $1.22, based on 10x 2012F P/E. As a shipyard with adequate cash, put YZJ as top pick with Chinese shipyards sector amid an industry downturn.