Yangzijiang Shipbuilding's H2 Profit Surges 50.5% to RMB3.6 Billion

Yangzijiang Shipbuilding (Holdings) Ltd., a leading shipbuilding company based in China, reported a significant increase in its H2 profit, which rose by 50.5% year-on-year to RMB3.6 billion. This strong performance was driven by several key factors, including higher shipbuilding margins, robust revenue growth, and gains from vessel disposal.

The company's shipbuilding gross margin widened to 25.5% in the second half of 2023, up from 17.7% in the first half, 13.5% in the second half of 2022, and a trough of 10.8% in the second half of 2021. This improvement can be attributed to favorable forex and steel costs, as well as the execution of higher value and margin contracts secured since 2021. The company has progressively executed these contracts, with the bulk of the profit margin recognized closer to the delivery of these vessels. Additionally, the favorable steel cost hovering around RMB4,000/t bodes well for further margin expansion.

Yangzijiang's net profit rose 26% year-on-year to RMB1.73 billion in the first half of 2023, ahead of expectations, thanks to stronger revenue growth of 16% and a 4.9ppt h-o-h margin expansion. The group also benefited from RMB90 million gains from vessel disposal in the first half of 2023. These factors contributed to the company's strong financial performance in the second half of 2023.

The company's order book stood at an all-time high of US$14.5 billion as of the end of 2023, with 58% of the orders being clean energy vessels. Based on Yangzijiang's revenue maximum run rate of c. US$3.3 billion a year, the current order book implies over 4 years of revenue coverage, which is higher than the ideal range of 2-3x. This strong pipeline of future revenue supports the company's growth and profitability.

Yangzijiang's robust financial performance has led to an increase in its order win target for 2024, which has been raised by 50% to US$4.5 billion. The company's strong order momentum is expected to continue, supported by robust demand for clean energy vessels and higher value contracts in the containership and tanker space.

In conclusion, Yangzijiang Shipbuilding's H2 profit surge of 50.5% to RMB3.6 billion is a testament to the company's strong financial performance, driven by higher shipbuilding margins, robust revenue growth, and gains from vessel disposal. The company's strong order book and high revenue coverage position it well for future growth and profitability. As the global demand for clean energy vessels and higher value contracts continues to grow, Yangzijiang Shipbuilding is well-positioned to capitalize on these opportunities and maintain its strong financial performance.