Yangzijiang: 1Q13 results below estimates; Revenues declined 22% y/y to Rmb2.87b, together with a 30% decline in earnings to Rmb717.2m; Gross profit margin improved to 36% because of improved performance of investment segment; shipbuilding-related segment margins maintained at 26%. Financial Investment segment bolstered group’s revenues vs its decline in shipbuilding-related segment amid industry downturn. YZJ continues its focus to becoming an integrated marine service provider, focusing on building up its supplementary revenue streams in Financial Investments, Property Development and Shipping Logistics. Mgmt says shipbuilding industry may have hit the trough, and recently seen signs of renewed activity. Current order book of US$3.3b; total contracts orders year-to-date of $US600m.
1Q13 core EPS is 18% above our expectation, at 30% of our FY13 and 26% of consensus, thanks to higher-than-expected shipbuilding revenue and margins. We raise our FY13-14 EPS by 3-16% for higher margins and orders. Upgrade to Neutral from Underperform in view of its better outlook this year with a higher target price at 1.2x, its last trough (previously 30% discount to last trough).
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