Yangzijiang Shipbuilding has reported a significant improvement in its financial performance for the first half of 2025, with a gross margin of 35% driven by reduced steel costs. This unexpected increase has led CGS International to revise its gross margin forecasts for the fiscal years 2025 and 2026 to 30% to 32%. The shipbuilder has also received letters of intent worth approximately $2 billion, indicating a more optimistic order outlook as clients begin to negotiate new contracts.
The company’s net profit for the first half of 2025 reached Rmb4.18 billion, surpassing expectations and accounting for 60% of the full-year forecast. Revenue stood at Rmb12.8 billion, aligning with projections. The profit boost was largely due to lower steel prices, which enhanced the shipbuilding gross margin beyond the anticipated 29%. Yangzijiang delivered 23 vessels during this period, including four from its joint venture with Yangzi-Mitsui.
Yangzijiang’s order book is valued at $23.2 billion, with year-to-date order wins of approximately $740 million. The company has adjusted its order win target for 2025 to $3.7 billion, reflecting increased demand for small to mid-sized vessels. Despite the shelving of plans for a new yard, the company anticipates sustainable annual order wins of $4.5 billion.
The target price for Yangzijiang’s shares has been raised to S$3.90, based on a 10x price-to-earnings ratio for 2026, reflecting improved peer valuations. The company plans to charter its first LNG carrier as a proof of concept, maintaining a dividend payout ratio of 30-40%. Potential catalysts for re-rating include easing trade tensions and stronger-than-expected gross margins and order wins, whilst risks involve order cancellations and rising steel costs.
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