Daiwa downgraded Yangzijiang Shipbuilding to Hold from Outperform despite fourth quarter earnings beating its forecast, as it pointed to the recent share price rise and lower-than-expected new order wins.
“Following a strong share-price performance over the past six months, we now see YZJ as fairly valued amid a challenging outlook for the global shipping sector, which has negatively impacted ship owners’ propensity and willingness to place new orders,” Daiwa said in a note on Friday.
The investment bank noted that earnings came in “significantly higher” than its forecasts on various one-offs. Yangzijiang Shipbuilding reported on Friday its fourth quarter net profit rose 47 percent on-year to 1.07 billion yuan, despite lower revenue, amid lower expenses and the reversal of an impairment loss.
But Daiwa lowered its estimate for new order wins for 2019-20 from US$1.8 billion a year to US$1.5 billion amid deteriorating container and dry-bulk markets.
That was after new order wins of US$1.46 billion in the previous year missed the previous guidance for US$1.8 billion, Daiwa said.
While Daiwa raised its 2019-20 revenue forecasts by 2-4 percent on expectations higher trading revenue will more than offset weaker shipbuilding revenue, the investment bank cut its 2019-20 earnings per share forecasts by 5-10 percent on lower core shipbuilding gross profit margin assumptions.
Daiwa said its earnings per share forecasts were around 6-7 percent below consensus on its lower profitability assumptions for the shipbuilding segment.
It cut its target price to S$1.37 from S$1.42.
The stock ended Monday down 0.69 percent at S$1.43.
