Yangzijiang

Shipping/ Yangzijiang: The long-anticipated scrapping policy eventually was released jointly by the four Chinese government bodies. The subsidy of RMB1,500/GRT was higher than street expectations, while the scope of the policy scope was narrower than hoped, with only vessels with Chinese flag and age threshold (>=23 years for dry bulkers) are eligible. The impact of the narrower scope is estimated to result in a global supply reduction of 1ppts compared to 1.8ppts originally. Nevertheless, given the 6% demand growth that DB projected going forward, dry bulk should still see decent recovery over 2014-15. Yangzijiang, a drybulk shipbuilder, would be a potential beneficiary from higher scrapping volumes and vessel orders. Bloomberg consensus estimates 12-month TP of $1.28 for the counter.