BS6

$3.73 SGD 14.7B market cap 22 February 2026

Yangzijiang Shipbuilding (Holdings) Ltd. BS6 BUFFETT / MUNGER / KLARMAN SUMMARY

1 SNAPSHOT

Price$3.73

Market CapSGD 14.7B

EVSGD 10.8B

Net DebtSGD -3.9B

Shares3.95B

2 BUSINESS

Yangzijiang Shipbuilding is China's largest private shipbuilder, operating four shipyards along the Yangtze River in Jiangsu Province. The company builds large containerships, oil tankers, bulk carriers, LNG carriers, and dual-fuel vessels for global shipping lines. Shipbuilding contributes 95% of revenue with a small but growing shipping segment (5%). Listed on SGX since 2007 and a Straits Times Index constituent, the company has a record US$23.2B orderbook with 74% in eco-friendly vessels.

Revenue: RMB 26.5B (SGD 4.9B) Organic Growth: 10.1%

3 MOAT NARROW

Cost advantage (10% structural edge over Korean/Japanese yards via lower labor costs, efficient Yangtze River supply chain, and halved construction times). Scale economies across four shipyards with growing capacity. Emerging technical moat in dual-fuel and LNG vessels (GTT TALA license, YAMIC JV with Mitsui). Customer relationships with major shipping lines (MSC, ZIM, PIL). Industry-leading 13% average net margin over the past decade, highest among global peers.

4 MANAGEMENT

CEO: Ren Letian (since 2020)

Excellent capital allocation: maintained and grew dividends through cycles (30-40% payout policy), strategic capex for Project Hongyuan (RMB 3B for high-value vessel capacity), LNG terminal investment (RMB 2B), YAMIC JV repositioning toward gas carriers. Fortress balance sheet with RMB 21.3B net cash. No dilutive equity raises. Family controls majority stake, strong skin in the game.

5 ECONOMICS

26.3% (FY24), 32.5% net margin (1H25) Op Margin

65.9% ROIC

RMB 11.9B (SGD 2.2B) FCF

Net cash (RMB 21.3B) Debt/EBITDA

6 VALUATION

FCF/ShareSGD 0.56

FCF Yield6.9%

DCF RangeSGD 3.00 - 7.44

Base FCF RMB 8B normalized (below FY24 peak), 10% growth years 1-3 (orderbook execution), 5% years 4-7 (cycle moderation), 2% years 8-10, 2% terminal growth, 10% discount rate (SGX-listed China company risk premium). DCF gives SGD 7.44 before China governance discount; applying 50% discount yields ~SGD 3.72.

7 MUNGER INVERSION -27.5%

Kill Event	Severity	P()	E[Loss]
USTR port fees reimposed/escalated on Chinese-built vessels	-25%	30%	-7.5%
Shipbuilding supercycle ends; newbuild prices crash 30%+	-35%	20%	-7.0%
Governance risk -- family control, China opacity, past investigation	-40%	10%	-4.0%
Steel price spike compresses margins on fixed-price contracts	-20%	15%	-3.0%
RMB appreciates sharply vs USD, eroding cost advantage	-15%	20%	-3.0%
Capacity overbuild across Chinese yards leads to pricing war	-15%	20%	-3.0%

Tail Risk: A US-China military conflict over Taiwan (5% probability) combined with full USTR tariff implementation could trigger a 50%+ drawdown. The company's operations are entirely in mainland China, with revenues denominated in USD from global customers. In a severe geopolitical scenario, SGX-listed Chinese companies could face delistings, sanctions, or capital controls. Net cash provides a floor but would be inaccessible to foreign shareholders in extreme scenarios.

8 KLARMAN LENS

Downside Case

In the bear case, the shipbuilding cycle peaks in 2025-26, newbuild prices decline 20-30%, and margins revert to mid-cycle levels (18-22% gross). New orders slow sharply as the USTR tariff overhang discourages customers. RMB appreciation compresses margins further. The stock trades down to 6-7x normalized earnings, implying SGD 2.00-2.50. However, the US$23.2B existing orderbook provides a floor for 3-4 years of revenue, and RMB 21.3B net cash (SGD ~1.00/share) limits permanent capital loss.

Why Market Wrong

The market applies a persistent China discount (10x P/E vs 15-20x for Korean peers) that may be excessive given YZJ's best-in-class margins, net cash fortress, and growing green vessel capabilities. The market also overweights USTR tariff risk (currently suspended) while underweighting the structural tailwind of maritime decarbonisation, which creates multi-decade demand for new vessels. The 34.5% gross margin in 1H2025 suggests current contracts are significantly more profitable than the market assumes.

Why Market Right

Shipbuilding is cyclical -- always has been, always will be. Peak margins (34.5% gross) likely represent the cycle top, not the new normal. Chinese shipbuilders are adding capacity aggressively, which historically leads to pricing pressure. The USTR tariff threat, even if suspended, introduces permanent uncertainty for customers choosing between Chinese and non-Chinese yards. The governance structure (family-controlled, dual-listed affiliates, past regulatory issues with founder) warrants a discount. Cyclicals deserve low multiples at peak earnings.

Catalysts

1. FY2025 results showing sustained 30%+ gross margins (Feb 2026 -- imminent) 2. Project Hongyuan completion and first vessel delivery (2027) demonstrating higher-value capability 3. Permanent resolution of USTR tariff uncertainty (political de-escalation) 4. LNG terminal project generating recurring revenue stream 5. Potential inclusion in MSCI indices or index weight increase

9 VERDICT WAIT

A- T2 Resilient

Strong Buy$3

Buy$3.3

Sell$5.5

Yangzijiang Shipbuilding is an exceptional business at a fair price. At SGD 3.73 (10.7x trailing P/E), the stock reflects its quality but provides limited margin of safety for a cyclical business near peak margins. Wait for a pullback to SGD 3.00-3.30 (8-9x normalized earnings) triggered by USTR fears, cycle concerns, or broader market correction. At those levels, the combination of 31% ROE, fortress balance sheet, and structural decarbonisation tailwinds makes this a compelling Buy. Position size 2-4%.

🧠 ULTRATHINK Deep Philosophical Analysis

BS6 - Ultrathink Analysis

The Real Question

The real question here is not whether Yangzijiang Shipbuilding is a good business. It transparently is. ROE of 31%, ROIC of 66%, gross margins expanding to 34.5%, a net cash position that represents 27% of market cap, and a US$23.2 billion orderbook that stretches to the end of the decade. The numbers are borderline obscene for an industrial manufacturer.

The real question is this: Are we buying a cyclical business at the top of the cycle, mistaking transient tailwinds for permanent competitive advantages?

This is the central tension. The shipbuilding industry has a brutal history. The 2007-08 superboom was followed by a decade of pain where yards went bankrupt, orderbooks evaporated, and investors who bought at peak earnings lost 70-90% of their capital. The global orderbook today, at 300+ million gross tons, is the third-highest in history -- after 2007 and 2008. That is not a comforting data point.

And yet, there are structural reasons to believe "this time is different" -- the four most dangerous words in investing, but sometimes genuinely true. The IMO's decarbonisation mandate, the aging global fleet, the shift to dual-fuel propulsion -- these are not cyclical factors. They are secular forces that will drive vessel replacement for decades. The question is whether these secular forces can sustain ordering activity through the inevitable cyclical downturn.

Hidden Assumptions

Assumption 1: Margins are structurally higher, not just cyclically elevated.

The market appears to be pricing in some margin compression (10x P/E despite 34.5% gross margins). But is the market right about the magnitude? YZJ's margin expansion is driven by three factors: (a) favorable USD/RMB exchange rate, (b) lower steel costs, and (c) higher newbuild prices on more complex vessels. Factor (a) is policy-dependent and could reverse. Factor (b) is cyclical and will mean-revert. Factor (c) -- the shift toward dual-fuel, LNG-capable, and methanol-ready vessels -- is genuinely structural. These vessels command significantly higher unit prices and margins. If YZJ continues to move up the value chain, mid-cycle margins could settle at 22-25% gross rather than the historical 15-18%. That is a significant re-rating thesis.

Assumption 2: Chinese shipbuilding dominance is permanent.

China now commands 56% of global shipbuilding output and 69% of new orders. This dominance is built on labor costs, supply chain proximity, and state support. But the USTR Section 301 investigation explicitly targets this dominance. If the US successfully pushes significant orders to Korean, Japanese, or (eventually) American yards, China's market share could shrink. However, the capacity simply does not exist outside China to absorb this volume. Korea and Japan are already running at near-full capacity. Building new yards takes 5-10 years. The pragmatic conclusion is that Chinese dominance will persist for at least a decade, regardless of tariff rhetoric.

Assumption 3: The Ren family will continue to act in minority shareholders' interests.

Family-controlled businesses in Asia can be extraordinary value creators or vehicles for extraction. The Ren family has spun off the financial business (YZJ Financial), is now spinning off the maritime investment arm (YZJ Maritime), and has made various related-party transactions. The 30-40% dividend payout ratio is decent but not exceptional. The family clearly views the group as a dynasty to be built, not a business to be stripped. But the opacity of PRC business relationships means we cannot fully verify alignment. The SGX listing and PwC audit provide some comfort, but not certainty.

The Contrarian View

For the bears to be right, several things would need to happen simultaneously:

The shipbuilding cycle turns sharply in 2026-27, with new orders falling 50%+ from 2024 peaks
USTR tariffs are reimposed and escalated, with other nations following suit
Steel prices spike while newbuild prices fall, creating a margin squeeze
The RMB appreciates 10%+ against the USD, eliminating the cost advantage
Chinese yards engage in a pricing war to fill capacity

This scenario is possible but has a compound probability of perhaps 5-10%. More importantly, even in this bear case, YZJ's existing orderbook provides revenue for 4+ years, the net cash position (RMB 21.3B = SGD ~1.00/share) provides a floor, and the company's cost advantage means it would be among the last Chinese yards to suffer.

The more subtle bear case is not a crash but a slow grind: margins revert to mid-cycle levels, new orders moderate, and the stock de-rates from 10x to 7-8x earnings. In that scenario, the stock might drift to SGD 2.50-3.00 but continue paying a 4-5% dividend. This is the scenario that actually matters for entry timing.

Simplest Thesis

Yangzijiang is the lowest-cost builder in the world's most essential industry, benefiting from a once-in-a-generation fleet replacement cycle driven by decarbonisation, and trading at single-digit earnings with a fortress balance sheet.

Why This Opportunity Exists

The discount exists for three overlapping reasons:

China discount. Chinese companies, particularly those with PRC operations and family control, trade at persistent discounts to global peers. Korean shipbuilders trade at 12-18x earnings; YZJ at 10x. This discount reflects real risks (governance, geopolitics, capital controls) but is often excessive for well-managed businesses.

Cyclical discount. The market knows shipbuilding is cyclical and reflexively applies low multiples at peak earnings. This is rational in principle but may be overly aggressive when the cycle is structurally driven (decarbonisation) rather than purely demand-driven.

USTR overhang. The uncertainty around US port fees on Chinese-built vessels has created a dark cloud over the sector. The fees were implemented, then suspended within 4 weeks, but could be reimposed. This uncertainty disproportionately impacts sentiment even though YZJ's orderbook is already secured through 2029.

The mispricing may persist because institutional investors are structurally underweight Chinese industrials, and the USTR uncertainty provides a convenient excuse not to engage.

What Would Change My Mind

Three specific, falsifiable conditions would invalidate this thesis:

Gross margins below 20% for two consecutive quarters. This would signal that the cost advantage is eroding and the cycle is turning faster than anticipated. The 1H2025 margin of 34.5% is the opposite -- but watching the 2H2025 and FY2026 progression is critical.
New orders below US$3 billion for two consecutive quarters. The 1H2025 new orders of US$537M for only 14 vessels (vs US$14.6B for 128 vessels in FY2024) is already alarming. If this persists into 2H2025, it suggests the USTR effect or cycle turn is real, not temporary.
Net cash position turns to net debt. The RMB 21.3B net cash is the safety margin. If aggressive capex (Project Hongyuan at RMB 3B, LNG terminal at RMB 2B) combined with margin compression erodes this buffer, the investment thesis weakens materially.

The Soul of This Business

Yangzijiang Shipbuilding was founded in 1956 as a state-owned repair yard on the Yangtze River. Ren Yuanlin, a worker who rose through the ranks to lead the privatization, transformed it into China's most profitable private shipbuilder. His son, Ren Letian, now runs the company at age 40-something after being groomed for two decades.

The soul of this business is operational excellence in a brutally competitive industry. Shipbuilding is a cost-plus business with fixed-price contracts that span years. Everything that can go wrong -- steel prices, currency moves, labor shortages, technical failures, weather delays -- falls on the shipbuilder. The margins YZJ achieves (industry-leading for a decade running) speak to a relentless culture of efficiency, discipline, and execution.

The company's strategic shift toward green vessels (74% of orderbook) is not just commercial opportunism. It is a bet that the future of shipping belongs to builders who can master dual-fuel propulsion, LNG containment systems, and ammonia-ready designs. The joint venture with Mitsui (YAMIC) for gas carriers, the license agreement with GTT for membrane technology, and the Hongyuan expansion for high-value vessels all point in the same direction: YZJ is climbing the value chain from commodity bulkers to sophisticated, high-margin green vessels.

If this transition succeeds -- and the 1H2025 margins suggest it is succeeding -- then the competitive position becomes increasingly durable. It is far harder to replicate the combination of Chinese cost advantages AND complex vessel-building capability than either one alone. Korean yards have the technology but not the cost base. Chinese state-owned yards have the cost base but often lack the efficiency and agility. YZJ sits at the intersection, and that is where the value lies.

The fragility in this business is cyclicality. Shipbuilding has never been a steady-state business. But within the cycle, the best operators -- like YZJ -- generate extraordinary returns at the peak, maintain profitability through the trough, and emerge stronger on the other side. The RMB 21.3B net cash balance sheet is not just financial prudence; it is a war chest for the inevitable downturn, when weaker competitors will struggle and opportunities will emerge.

The patient investor's path is clear: wait for the market to offer a price that compensates for cyclical risk, buy at SGD 3.00-3.30, hold through the cycle, and collect growing dividends along the way. At those levels, you are buying one of the world's best industrial businesses at 8-9x earnings with a net cash balance sheet equal to a quarter of the purchase price. That is the margin of safety that makes cyclical investing rational rather than reckless.

Executive Summary

3-Sentence Investment Thesis

Yangzijiang Shipbuilding is China's largest and best-managed private shipbuilder, riding a multi-year super-cycle driven by fleet decarbonisation, aging vessels, and global trade growth. The company generates exceptional returns (ROE 31%, ROIC 66%) with a fortress balance sheet (RMB 21B net cash) and a record US$23.2B orderbook providing earnings visibility through 2029. At a trailing P/E of 10.7x and forward P/E of 9x, with an FCF yield near 7%, the stock offers compelling value for a business with demonstrated pricing power and structural tailwinds, though US-China geopolitical risk warrants a margin of safety.

Key Metrics Dashboard

Metric	Value	Assessment
P/E (TTM)	10.7x	Cheap for quality
Forward P/E	9.0x	Very attractive
EV/EBITDA	7.1x	Significant discount
P/B	2.97x	Premium justified by ROE
ROE	30.7%	Exceptional
ROIC	65.9%	World-class
Gross Margin	28.7% (FY24), 34.5% (1H25)	Expanding rapidly
Net Cash	RMB 21.3B (~SGD 4B)	Fortress
Dividend Yield	3.2%	Growing fast (+85% yoy)
FCF Yield	~6.9%	Strong
Orderbook	US$23.2B	4x annual revenue
Buffett Score	92/100	Near-perfect

Decision

WAIT (BUY on pullback) -- Strong Buy below SGD 3.00, Accumulate below SGD 3.30.

At SGD 3.73, the stock trades at fair value for a cyclical business at peak margins. The ideal entry is on a pullback triggered by USTR tariff fears, ordering slowdown, or broader market correction. The secular tailwinds and quality of the business warrant a position at the right price.

Phase 0: Source Documents Reviewed

Annual Report FY2024 -- Corporate profile, financial highlights (5-year), chairman's statement, board of directors, senior management, corporate milestones (p.1-20)
FY2024 Condensed Financial Statements (SGX filing, 26 Feb 2025) -- Full income statement, balance sheet, cash flow, equity changes, notes (10 pages)
FY2024 Press Release -- Financial highlights, segment performance, order book, outlook, dividend (3 pages)
FY2023 Condensed Financial Statements (SGX filing) -- Prior year comparatives
1H2025 Press Release (6 Aug 2025) -- Most recent results, updated order book, margin expansion, outlook
Annual Reports FY2021-2023 -- Historical financial data and corporate developments
StockAnalysis.com -- 5-year financial statements, valuation metrics, dividend history (cross-check)
Industry research -- Global shipbuilding market outlook, China market share data, USTR Section 301 developments

Phase 1: Risk Analysis (Inversion -- "What Could Kill This Investment?")

Risk Register

#	Risk Event	Probability	Severity	Expected Impact
1	USTR port fees on Chinese-built vessels reimposed/escalated	30%	-25%	-7.5%
2	Shipbuilding supercycle ends; newbuild prices crash 30%+	20%	-35%	-7.0%
3	Steel price spike (+50%) compresses margins on fixed-price contracts	15%	-20%	-3.0%
4	RMB appreciates sharply vs USD, eroding cost advantage	20%	-15%	-3.0%
5	Governance risk -- founder family control, China opacity	10%	-40%	-4.0%
6	Order cancellations in recession (10%+ of orderbook)	15%	-20%	-3.0%
7	Technology disruption (ammonia/hydrogen propulsion shift bypasses YZJ)	10%	-25%	-2.5%
8	China-Taiwan military conflict disrupts shipping lanes/trade	5%	-50%	-2.5%
9	Capacity overbuild across Chinese yards leads to pricing war	20%	-15%	-3.0%
10	Project Hongyuan (RMB 3B capex) delays or cost overruns	15%	-10%	-1.5%
	Total Expected Downside			-37.0%

Deep Dive: Top 3 Risks

1. USTR Port Fees / US-China Trade War (7.5% expected impact)

The USTR implemented Section 301 port fees on Chinese-built vessels beginning Oct 2025, starting at $50/net ton. These were suspended in Nov 2025 following the Trump-Xi summit. Key considerations:

Yangzijiang's new orders plunged to just 6 vessels in 1H2025 (vs 128 in FY2024) partly due to USTR uncertainty
Even if reimposed, limited capacity outside China means shipowners have few alternatives
Fee was active <4 weeks before suspension; political leverage tool rather than permanent policy
85% of 1H2025 new orders were containerships (less US-trade exposed than bulk carriers)

Mitigant: US$23.2B existing orderbook provides 4+ years of revenue visibility regardless of new order flow. Suspension suggests political utility outweighs enforcement intent.

2. Shipbuilding Cycle Peak (7.0% expected impact)

The global orderbook is at 300M+ GT (3rd highest ever, after 2007-08 superboom). MSI forecasts 2026-27 as the nadir of the ordering cycle with ~40M GT contracted in 2027, down from current ~90M GT.

Newbuild prices may face pressure as capacity expands
1H2025 gross margin hit a record 34.5% -- how sustainable?
Shipbuilding is inherently cyclical; this cycle has run 3+ years

Mitigant: Unlike 2007-08, this cycle is driven by structural decarbonisation (IMO regulations mandate cleaner vessels). Fleet age is elevated. The dual-fuel/green vessel mandate creates a floor for ordering activity. YZJ's margins include favorable USD/RMB exchange benefits that could persist.

3. Governance / China Country Risk (4.0% expected impact)

Family-controlled business (Ren Yuanlin/Ren Letian father-son)
Founder Ren Yuanlin previously "took leave to aid investigation" (maritime-executive.com report)
PRC operating environment with limited transparency
Spin-off of financial business (YZJ Financial) in 2022 was complex restructuring
Non-independent directors include Liu Hua (CFO of YZJ Financial, also non-independent NED here)

Mitigant: SGX listing provides regulatory oversight. PricewaterhouseCoopers as auditor. Board has 3 independent directors out of 5. Company has won transparency awards from SIAS multiple times. Dividend policy (30-40% payout) demonstrates commitment to shareholder returns.

Phase 2: Financial Analysis

Revenue & Growth Analysis

Year	Revenue (RMB M)	Growth	Shipbuilding Rev	Shipping Rev
FY2020	14,841	-2.0%	~14,000	~800
FY2021	15,137	+2.0%	~14,000	~1,000
FY2022	20,705	+36.8%	~19,500	~1,000
FY2023	24,112	+16.5%	22,788	1,022
FY2024	26,542	+10.1%	25,216	1,243
1H2025	12,878	-1.3%	~12,250	511

Revenue CAGR (FY2020-FY2024): 15.6% Shipbuilding drives 95% of revenue. Shipping segment (5%) growing via fleet expansion.

Profitability Analysis

Margin Trajectory (most compelling aspect of the thesis):

Year	Gross Margin	Net Margin	Comment
FY2020	28.4%	17.0%	Pre-cycle
FY2021	13.8%	24.4%*	Low gross, high net (investment gains)
FY2022	15.4%	13.6%	Trough (spin-off effects)
FY2023	22.4%	17.0%	Recovery
FY2024	28.7%	25.0%	Expansion
1H2025	34.5%	32.5%	Record

*Note: FY2021 net income includes discontinued operations from YZJ Financial spin-off.

The margin expansion from 15.4% gross in FY2022 to 34.5% in 1H2025 is extraordinary. Drivers:

Higher newbuild prices on recently negotiated contracts
Favorable USD/RMB exchange rate (contracts in USD, costs in RMB)
Lower steel and raw material costs
Shift toward higher-value dual-fuel vessels (LNG, methanol)
Operational efficiency gains (construction time halved from 2-3 years to ~12 months for 10,000 TEU ships)

DuPont ROE Decomposition (FY2024)

Component	Value	Comment
Net Profit Margin	25.0%	Exceptional
Asset Turnover	0.49x	Low (capital intensive)
Equity Multiplier	2.08x	Moderate leverage
ROE	30.7%	Exceptional for any industry

Owner Earnings Calculation (FY2024)

Item	RMB M
Net Income	6,634
+ Depreciation & Amortization	461
- Maintenance CapEx (est. ~50% of total)	(528)
- Working Capital Increase (net)	-
Owner Earnings	~6,567
Shares Outstanding	3,951M
Owner Earnings per Share	RMB 1.66
In SGD (@ 5.40 CNY/SGD)	SGD 0.307
Owner Earnings Yield (@ SGD 3.73)	8.2%

Free Cash Flow Analysis

Year	OCF	CapEx	FCF	FCF Margin
FY2020	(612)	(288)	(900)	-6.1%
FY2021	6,143	(669)	5,474	36.2%
FY2022	4,632	(905)	3,727	18.0%
FY2023	7,973	(829)	7,144	29.6%
FY2024	12,961	(1,056)	11,905	44.8%

FY2024 FCF of RMB 11.9B is phenomenal -- 1.8x net income. The high FCF conversion is driven by advance payments from the massive orderbook (contract liabilities grew from RMB 8.1B to RMB 14.3B in FY2024).

Balance Sheet Fortress

Metric	FY2024	Assessment
Cash & Equivalents	RMB 28.1B	Massive
Total Debt	RMB 6.8B	Manageable
Net Cash	RMB 21.3B	Fortress
Net Cash as % of Market Cap	~27%	Significant
Contract Liabilities (advance payments)	RMB 14.3B	Strong order security
Current Ratio	1.69x	Healthy
D/E Ratio	0.22x	Very low

The net cash position of RMB 21.3B (approximately SGD 3.9B) represents ~27% of the current market cap. This means investors are paying ~SGD 10.8B for the operating business that generated RMB 6.6B in net income.

DCF Valuation

Assumptions:

Base FCF: RMB 8.0B (normalized, below FY2024 peak of 11.9B)
Growth Phase 1 (Years 1-3): 10% growth (orderbook execution + margin expansion)
Growth Phase 2 (Years 4-7): 5% growth (cycle moderation)
Growth Phase 3 (Years 8-10): 2% growth (mature phase)
Terminal Growth: 2%
Discount Rate: 10% (SGX-listed China company)

Year	FCF (RMB B)	PV Factor	PV (RMB B)
1	8.80	0.909	8.00
2	9.68	0.826	8.00
3	10.65	0.751	8.00
4	11.18	0.683	7.64
5	11.74	0.621	7.29
6	12.32	0.564	6.95
7	12.94	0.513	6.64
8	13.20	0.467	6.16
9	13.46	0.424	5.71
10	13.73	0.386	5.30
Terminal	175.1	0.386	67.59
Total PV			137.3
+ Net Cash			21.3
Enterprise + Cash			158.6
Per Share (3.95B shares)			RMB 40.2
In SGD (@ 5.40)			SGD 7.44

DCF Fair Value Range:

Bear Case (8% discount, lower growth): SGD 5.50
Base Case (10% discount): SGD 7.44
Bull Case (lower discount, higher growth): SGD 9.50

Current price (SGD 3.73) implies ~50% discount to base case DCF. This is typical of Chinese-listed companies where governance discount is significant. A more conservative approach using a 50% "China discount" gives an adjusted fair value of SGD 3.72 -- essentially current price.

Earnings-Based Valuation

Method	Metric	Multiple	Fair Value (SGD)
P/E on FY2024 EPS	RMB 1.68/sh = SGD 0.311	12x	SGD 3.73
P/E on FY2024 EPS	RMB 1.68/sh = SGD 0.311	15x	SGD 4.67
P/E on normalized EPS	RMB 1.30/sh = SGD 0.241	12x	SGD 2.89
EV/EBITDA	Current 7.1x	8x target	SGD 4.20
Owner Earnings	SGD 0.307/sh	12x	SGD 3.68

Fair Value Range: SGD 3.00 - 4.70 (depending on cycle assumptions)

Phase 3: Moat Analysis

Moat Rating: NARROW (with potential to WIDEN)

Moat Sources

1. Cost Advantage (PRIMARY -- 10% structural advantage)

Labor costs in Jiangsu Province are significantly lower than Korean/Japanese yards
Four shipyards along the Yangtze River provide efficient supply chain access
Construction time of ~12 months for 10,000 TEU containership (halved from 2-3 years)
13% average net margin over the past decade -- highest among global peers
Supply chain ecosystem in Jiangsu province for steel, components, engineering

2. Scale Economies (SECONDARY)

5-6% global market share with growing capacity
Project Hongyuan (RMB 3B capex, completion late 2026) will significantly expand capacity for high-value vessels
YAMIC joint venture with Mitsui adds LNG carrier expertise
Ability to negotiate favorable steel procurement terms at scale

3. Switching Costs (MODERATE)

Shipbuilding relationships are long-term; repeat customers prefer known yards
Technical qualification for complex vessels (LNG, dual-fuel) creates barriers
Order slots 3-4 years out lock in customers
Customers like MSC, ZIM, PIL are repeat clients

4. Technical Capability (EMERGING)

First Chinese private yard to deliver 175,000 CBM LNG carriers (with GTT Mark III technology)
Delivered first methanol dual-fuel containership (May 2024)
74% of orderbook is eco-friendly/green vessels
Technical Assistance and License Agreement (TALA) with GTT for membrane containment systems
Expanding into high-end gas carriers (traditionally Korean/Japanese domain)

Moat Durability Assessment

Widening factors:

IMO decarbonisation mandates create structural demand for new vessel types
YZJ is gaining capability in complex vessels that previously only Korean yards could build
Project Hongyuan will add state-of-the-art capacity for dual-fuel ships and gas carriers
LNG terminal project integrates into LNG supply chain

Narrowing risks:

Other Chinese yards (CSSC state-owned, New Times Shipbuilding) are also expanding
Korean yards (HD Hyundai, Samsung Heavy, Hanwha Ocean) maintain technology lead in LNG
USTR trade friction could divert orders to non-Chinese builders
Cyclical nature of shipbuilding means margins will compress eventually

Verdict: The moat is currently NARROW but widening. Cost advantage is durable. Technical capability in green vessels is improving rapidly. The main risk is cyclicality -- this is a cyclical business, and moats in cyclical industries are always narrower than in recurring-revenue businesses.

Phase 4: Decision Synthesis

Management Assessment

Factor	Assessment
CEO	Ren Letian (since April 2020 as CEO, Executive Chairman)
Background	Son of founder Ren Yuanlin; joined Group 2006 as site project manager; Masters from London Southbank University
Tenure	20 years at the company, 6 years as CEO
Insider Ownership	Ren family controls majority stake (~25-30% estimated through Yangzijiang Financial and direct holdings)
Skin in Game	Very strong -- family fortune is tied to the company
Capital Allocation	Excellent -- maintained dividends through cycles, disciplined capex (Project Hongyuan is strategic), net cash balance sheet
Track Record	Revenue from RMB 14.8B (FY2020) to RMB 26.5B (FY2024) with margins expanding; orderbook from ~US$8B to US$24.4B
Succession	Clear -- Ren Letian has taken over from father and proven himself with record results
Concern	Family dynasty model; past "investigation" involving founder; limited board independence

Investment Thesis Validation

Bull Case (40% probability): SGD 5.00-6.00 in 2-3 years

Shipbuilding margins remain elevated (1H2025 at 34.5% supports this)
Orderbook of US$23.2B executes smoothly, generating RMB 7-8B annual profit
Project Hongyuan expands capacity and capability into high-margin gas carriers
USTR tariffs remain suspended or reduced
Market re-rates from 10x to 13-15x P/E as earnings prove durable

Base Case (40% probability): SGD 3.50-4.50

Margins moderate from peaks but remain healthy (25-30% gross)
New orders slow but existing orderbook provides revenue through 2028
Dividend grows to SGD 0.14-0.15 (4-5% yield)
P/E remains range-bound at 9-12x

Bear Case (20% probability): SGD 2.00-2.80

USTR tariffs reimposed and escalated; new orders collapse
Newbuild prices decline 20-30% as cycle turns
RMB appreciation compresses margins
Multiple compresses to 6-8x on cycle fears
Net cash provides floor (SGD 1.00/share)

Expected Return Calculation

Scenario	Probability	Return	Weighted Return
Bull	40%	+50%	+20.0%
Base	40%	+5%	+2.0%
Bear	20%	-30%	-6.0%
Expected Return			+16.0%
+ Dividend Yield			+3.2%
Total Expected Return			+19.2%

Position Sizing

Factor	Score	Weight	Weighted
Quality (ROE, margins, FCF)	9/10	25%	2.25
Moat Durability	6/10	20%	1.20
Valuation	7/10	25%	1.75
Management	7/10	15%	1.05
Risk Profile	5/10	15%	0.75
Total			7.00/10

Recommended Position: 2-4% of portfolio

2% at current prices (SGD 3.73)
Scale to 4% if price drops to SGD 3.00-3.30

Monitoring Triggers

Metric	Current	Action Threshold	Action
Gross Margin	34.5% (1H25)	Below 22%	Reassess thesis
New Orders (annual)	US$14.6B (FY24)	Below US$3B for 2 quarters	Review cyclical position
Net Cash	RMB 21.3B	Net debt position	Urgent review
USTR Tariff Status	Suspended	Reimposed at >$80/NT	Reassess entry price
Orderbook	US$23.2B	Below US$15B	Cycle turning signal
Dividend	SGD 0.12	Cut by >30%	Reassess management confidence
Steel Price (HRC China)	~RMB 3,600/t	Above RMB 5,000/t	Margin compression risk

Conclusion

Yangzijiang Shipbuilding is an exceptional business by any measure: 31% ROE, 66% ROIC, 34.5% gross margins (and rising), a RMB 21.3B net cash fortress balance sheet, and a US$23.2B orderbook providing 4+ years of earnings visibility. The management team, despite governance concerns typical of Chinese-controlled companies, has demonstrated excellent capital allocation and operational execution.

The stock is cheap at 10.7x trailing P/E and 9x forward P/E, with an FCF yield near 7% and a growing dividend (3.2% yield, up 85% yoy). However, this is a cyclical business at or near peak margins, and the USTR tariff overhang creates uncertainty.

The optimal strategy is patience. Wait for a pullback to SGD 3.00-3.30 (8-9x earnings on normalized EPS) which would provide a margin of safety against cycle-peak risk. At those levels, the combination of quality, value, and structural tailwinds from maritime decarbonisation makes this a compelling investment.

Quality Grade: A- (exceptional financials, narrow but widening moat, cyclical business, governance discount) Tier: T2 Resilient (strong through-cycle track record, but cyclicality prevents T1)

Analysis based on: FY2024 Annual Report, FY2024 SGX Results Announcement, FY2024 Press Release, 1H2025 Press Release, Annual Reports FY2021-2023, StockAnalysis.com financial data, industry research on global shipbuilding.