Yangzijiang

Yangzijiang: Macquarie views the required relocation of YZJ’s Jiangsu yard by Mar 13 as a "sweet deal”. Given the current overcapacity in shipbuilding (esp among Chinese yards), house believes the 17% capacity reduction is highly timely. As a result, YZJ will benefit from better right-sizing its operations to current industry conditions and reducing overhead from excess capacity. Adds YZJ will be entitled to sizable compensation of Rmb720m and the company also indicated it could participate alongside the municipal govt in redeveloping the vacated land. Macquarie expects minimal disruption and a smooth transition due to a long lead time. It keeps an Outperform call with $1.55 target, hailing YZJ as top pick among Chinese shipbuilders due to strong fundamentals and superior balance sheet. The street has 12 buy calls on ths tock vs 6 sells with consensus target price of $1.43.