Yangzijiang

Yangzijiang: 1Q11 results above consensus.
Record high net profit of Rmb 955m, +63% yoy, on the back of revenue of Rmb 3050m, +14% yoy. With its new Changbo yard, YZJ delivered a total of 17 vessels this qtr, up from 10 vessels delivered in 1Q10…

Gross margin expanded to 27.1% from 23.3% yoy, as the Group continued to work through the higher margin contracts secured prior to the financial crisis.
YZJ also benefited from doubling of other income to Rmb 281m, driven by the increased invmts in held-to-maturity financial assets, as well as a 210% jump in other gains to Rmb 124m, due to positive mark to market valuation for outstanding contracts denominated in Euro…

Ytd, YZJ secured 14 orders with aggregate value of US$512m. Order book stands at 131 vessels valued at US$5.4b.
Mgt remains confident on continued growth and profitability in 2011. Plans to increase capacity through additional stake in its Xinfu yard (from 20% to 60%). Over the next 3 yrs, also plans to invest Rmb 4b to convert the Xinfu yard to have annual capacity to build 10 very large vessels, ie VLCCs or similarly large containerships…

Stock trades at 10.8x P/E, vs Cosco’s at 21x, and Rongsheng’s 18.8x.
Pre-results, the majority of Street had Buy ratings with recent TP ranging btwn $2.30- 2.69.