Yangzijiang

Yangzijiang: 3Q10 net profit 12% above consensus est. Net profit was Rmb 730m, +32% yoy, -9% qoq. Revenue was Rmb 3.1bn, +19% yoy, flat qoq, as the Group delivered 14 vessels vs 7 in 3Q09. Net margins improved yoy to 23.7% from 21.4%, as Group continued to work on the higher margin shipbuilding contracts secured prior to the financial crisis, but fell from 26% in 2Q, due to higher operating expense from the new Changbo yard and increased pdt dev expenditures...

Mgt remains confident of continued growth and profitability for FY2010, underpinned by healthy order book of 128 vessels amounting to US$5.3bn, to stretch till late 2012. Group intends to enhance pdtn capacity by 40% in the year 2012 and is looking into building bigger and newer generation vessels to increase its product range. Expects further improvement in cost control through more vertical integration…

Stock trades at 13.7x trailing PE, vs Cosco’s 30.5x.
Nevertheless Morgan Stanley keeps Equal Weight call, says at 3.4x 2011e P/B, YZJ valuation is no longer cheap and likely already reflects the fundamental strength.
Rest of Street likely to keep their Buy, Hold ratings on YZJ as well.