Yangzijiang Shipbuilding: A Dual-Threat Investment in the Shipbuilding Renaissance

The global shipbuilding industry is undergoing a quiet revival, driven by stricter environmental regulations, rising trade volumes, and a wave of orders for next-generation vessels. At the heart of this recovery is Yangzijiang Shipbuilding (Holdings) Ltd. (SGX:BS6), a Chinese shipbuilder offering investors a rare combination of 5.6% dividend yield, robust earnings growth, and strategic advantages in a sector poised for long-term expansion. Here's why this stock should be on your radar—and how to position for both income and capital gains.

The Undervalued Equity: A Bargain in a Growing Sector

Yangzijiang's stock is currently trading at a 7x forward P/E ratio for fiscal year 2026, significantly below the average of its peers. Analysts, including DBS and UOB Kay Hian, have set price targets of S$3.80 and S$3.29, respectively, implying a 46% upside from its June 2025 price of S$2.22. The disconnect between valuation and fundamentals suggests the market has yet to fully appreciate the company's US$23.2 billion order backlog, fully booked through 2028/2029, which ensures steady revenue for years.

Dividend and Shareholder-Friendly Policies: A Safe Harbor for Income Investors

With a 5.6% dividend yield (projected to rise to 7.8% by 2026) and a commitment to return 30–40% of earnings to shareholders, Yangzijiang offers stability amid market volatility. The company has already repurchased 34.5 million shares this year through its buyback program, signaling confidence in its valuation. This dividend-plus-buyback combo makes it a compelling option for investors seeking both income and downside protection.

Earnings Growth: Backed by a Mountain of Orders

The company's earnings per share (EPS) are projected to grow 5.36% in 2025 and 11.61% in 2026, with long-term visibility from its US$23.2 billion order backlog. A key driver is its focus on high-margin niche markets, such as liquefied natural gas (LNG) carriers and eco-friendly vessels. These vessels, which now make up 74% of its order book, align with global efforts to reduce maritime emissions, ensuring steady demand.

Strategic Advantages: Vertical Integration and Green Ship Leadership

Yangzijiang's vertical integration—controlling everything from steel procurement to final assembly—gives it a 29-30% gross margin advantage over competitors. This structural efficiency, combined with stable steel prices (currently RMB3,400/tonne), has insulated margins even as costs for rival shipyards fluctuate. Additionally, its expertise in green shipbuilding positions it to capture a rising share of the $100 billion+ LNG carrier market, which now accounts for 40% of global ship orders.

Risks to Consider

• Steel Price Volatility: While prices are stable now, a sudden spike could pressure margins.
• Geopolitical Risks: U.S.-China trade tensions and shifts in shipowner preferences (e.g., toward Korean yards) could disrupt future orders.
• Execution Risks: Maintaining its order pipeline beyond 2028/2029 will require winning new contracts in a competitive market.

However, the company's fully booked order backlog mitigates near-term risks, and its focus on green ships reduces reliance on volatile bulk cargo demand.

Investment Recommendation: Accumulate for Dual Returns

Yangzijiang Shipbuilding is a buy for investors seeking both income and growth. Its 5.6% dividend yield, visible EPS growth, and fortress-like order book make it a rare “dividend growth” story in a shipbuilding sector that's often overlooked. Analysts' price targets imply a 46% upside, while its low valuation offers a margin of safety against near-term risks.

Action to Take: Gradually accumulate the stock on dips below S$2.50. Monitor the August 8, 2025 earnings report for updates on order wins and dividend policies. For a conservative approach, pair this with a stop-loss below S$1.80.

In a world where income and growth are hard to find in the same stock, Yangzijiang Shipbuilding stands out as a dual-threat opportunity in one of the most underappreciated industries today.