Highlights

• YZJ’s 1H26 net profit of Rmb5.37b (+28.4% yoy) beat our expectations, at 55% of our/consensus full-year forecast, driven by stronger-than-projected revenue delivery as well as positive margins surprises in shipbuilding.
   
• Orderbook remains strong, at US$22.4b as of end-1H26; together with good contract pricing levels, this orderbook provides good revenue/earnings visibility through 2029.
   
• Management is confident in meeting its 2026 contract win target of US$4.5b.
   
• Maintain BUY, with a higher target price of S$5.30, based on 9.1x 2028F PE.
   

Analysis

• 1H26 results are a clean beat. Yangzijiang Shipbuilding’s (YZJ) 1H26 results came in a strong beat to our expectations, with reported net profit of
  Rmb5.37b (+28.4% yoy) forming 55% of our/consensus full-year forecasts. The beat was driven by both: a) stronger-than-expected revenue delivery, and b) positive surprises from shipbuilding gross profit margins (GPM). Excluding one-off items such as forex gains/(losses), disposal gains/(losses) and subsidies/incentives, etc, core operating profit expanded by a strong 42.6% yoy (+21.2% hoh) to Rmb5.82b, by our estimate.
   

• Revenue beat expectations, supported by fresh revenue contribution from Hongyuan yard. Revenue rose 36% yoy to Rmb17.5b, forming
  52%/54% of our/consensus full-year forecasts. The Hongyuan yard, which is still under construction and remains on track to be completed in 2H26, has started to generate revenue, contributing Rmb545m revenue in 2Q26. Management guided that while the Hongyuan yard remains on track for completion by end-26, it is expected to contribute more revenue in 2H26. Once fully integrated into YZJ’s yard portfolio in 2027, the Hongyuan yard is expected to contribute to about 20% of YZJ’s total revenue.
   
• Positive surprise from gross profit margins. YZJ’s GPM expanded 1.7ppt yoy (2.2ppt hoh) to 36.2%, driven by higher margins from both shipbuilding and shipping segments. 
   
• Shipbuilding GPM increased 1.9ppt yoy (+2.1ppt hoh) to 37.1%, mainlydriven by: a) the progressive construction of vessels secured at higher
  contract prices (order wins back in 2023-24); and b) a favourable product mix, which include ultra-large containerships and very large ethane carriers. This more than offsets the negative impacts from a strengthened renminbi against the US dollar (in which YZJ’s contract wins are denominated).
• As for shipping segment, GPM benefitted from a higher Baltic Dry Index, averaging at about 2,350 in 1H26, compared with approximately 1,300 in
  1H25. Management shared that YZJ has entered into one-year contracts for its dry bulk carrier fleet at favourable prices levels during 1H26.
   
• Strong orderbook of US$22.4b providing good revenue visibility through 2029. YZJ maintains a strong net orderbook of US$22.4b as of end-
  1H26, largely unchanged versus end-25, despite the strong revenue delivery in 1H26. Management highlighted that YZJ’s shipbuilding slots have been booked through 2029, with 2029 delivery slots also nearly full.
   
• Management confident in meeting its US$4.5b order win target for 2026. YZJ bagged US$1.96b worth of contracts in 7M26, driven by demand across all vessel types. While the ytd contract wins track slightly behind schedule, management is confident that YZJ will meet its US$4.5b contract win target for 2026, given the negotiation dynamics for contracts in the pipeline.
   
• Margins for new contracts remain strong. According to management, even though average new vessel prices have moderated by about 5% from
  the peak prices levels seen 2023-24, the price levels of YZJ’s new order wins remain comparable to peak levels, as YZJ, given its good reputation and proven execution track record, can get the best-margin contracts in the market. Management also noted that YZJ, given its strong orderbook on hand, has no intention of engaging in price wars for the next two years.
   
• Strong earnings outlook through 2029. Given: a) the strong orderbook on hand; and b) the good price levels of the contracts in the orderbook (which imply sustainable strong margins, assuming stable steel prices and forex rates), YZJ’s strong profitability is largely secured through 2029, in our view.