YZJ Shipbuilding: the Business of Moving the World
- Tiago Q T
- Mar 21
- 5 min read
Most travellers to Singapore come in search of its futuristic landmarks - Gardens by the Bay with those almost alien Supertrees, Cloud Forest, Flower Dome, the towering Marina Bay Sands, and so on. Yet there’s another quintessential sight that’s often overlooked: a parade of cargo vessels dotting the horizon. Because Singapore sits at the tip of the Malacca Strait, around 30% of global trade squeezes through a channel just a few kilometres wide. Look out the window when landing at Changi, or gaze from a tall vantage point, and you’ll see the busiest maritime hub on Earth in action. Sure, futuristic buildings are impressive, but there's something uniquely fascinatng about seeing a tangible slice of global GDP floating right before your eyes.
Also, that contrast - touristic flashy architectural wonders on land, disregarded ships offshore - is a bit like investing. Everyone scrambles to buy into the next tech IPO or a famous lifestyle brand, while much fewer pay attention to industries that quite literally keep the world moving - like shipping. So, for this post, I want to give some thoughts on Yangzijiang Shipbuilding (YZJ), listed on the Singapore Exchange under the ticker BS6. Let’s discuss what YZJ does, how it’s performed, and why I invested in it.
Bit of Background: What is YZJ?
YZJ started in 1956 as a small shipbuilding/ship-repairing cooperative by the canals of Jiangyin, China. In the early years, it specialised in wood and cement vessels. By the 1970s, it had upgraded to a more spacious Yangtze River site. Fast-forward through stock restructurings in the late ’90s and a giant new plant in 2005, YZJ became the first Chinese shipbuilding enterprise to list on the Singapore Exchange (SGX) in 2007. A couple of years later, it started ranking among China’s top five shipbuilders by output, and in 2021, it cracked the top ten globally. It currently has an annual production capacity exceeding 7 million DWT - basically, the number of metric tons that you can load on a ship, and it'll still (safely) float. Beyond size, analysts at DBS Bank called it "the largest and best-managed private shipbuilder in China," citing cost advantages, solid execution, and strong project oversight.
What They Do
1) Shipbuilding
YZJ Shipbuilding's core business is... roll the drums... SHIPBUILDING. This is where 95% of the group's revenue comes from. They mainly build container carriers (which drive the vast majority of revenue), bulk carriers, oil tankers, and, increasingly, gas carriers (LNG, LPG, LEG). An ESG side note: around 82% of its current order book comprises alternative-fuel or dual-fuel vessels, aligning with global moves toward greener shipping (think methanol or LNG-fuelled ships).
2) Shipping
They also run a smaller shipping segment - 34 ships with 2+ million DWT capacity as of 1H2024. Although not a massive revenue contributor, this fleet can help YZJ place orders internally or pivot fleet usage depending on market conditions. Think of it as a strategic buffer to add resilience.
The numbers
Over the past two decades, YZJ’s revenue and earnings have climbed considerably - especially in the late-2000s - then slowed to about a 3% annual growth since 2011. The company has stayed consistently profitable every single year since it began trading in Singapore (including the years of China’s strict pandemic lockdowns). Now, DBS projects a ~15% jump in revenue and ~20% growth in bottom line for the coming two years due to YZJ’s hefty order backlog. That implies S$0.40/share in earnings by 2026, translating to a PE ratio of about 6 to 6.5 with the current share price near S$2.45. Even using the current S$0.31 EPS, you get a ~7.5 PE, near the low end of its last 15-year range.
On balance sheet strength: YZJ has historically maintained more cash than total debt, and right now, their net cash is near an all-time high - roughly S$1.20 per share. That provides a comfort buffer in a capital-intensive sector; you know future income is more likely to flow to shareholders rather than bondholders. A moderate 38% dividend payout currently yields around 5%. Given their strong cash flow, a dividend hike in 2025 wouldn't be surprising.
The Outlook
The shipbuilding industry as a whole is seeing some robust tailwinds from trends like maritime decarbonisation, rising trading volumes, and fleet renewal demand. According to YZJ's FY2024 media release, "In 2024, the industry registered a total order intake of US$204 billion in contract value [...], reaching the highest in 17 years."
You can see that reflected in its order book. The figure above shows the evolution of its outstanding order book. It currently stands at a historical high of USD 24.5 billion for 245 vessels, with deliveries spanning from 2025 to 2030. In cyclical industries such as shipbuilding, you typically worry about demand drying up. But YZJ's yards seem fully booked for quite a while.
Another milestone is YZJ’s forthcoming first LNG carrier (debuting in 2025) - a sector with high barriers to entry. Building LNG carriers demands advanced tech and specialised designs, so entering this market is a nice addition to the portfolio. Lastly, YZJ is diversifying into a proposed RMB 2 billion (SGD 370 million) LNG terminal in Jiangyin. Although I couldn't find revenue projections, given the company's history, I'd expect some nice returns on that CAPEX.
Unfair sell-off
Despite all the bullish points I made above, YZJ lost about 30% of its market cap from late February to mid-March. The main culprit: A USTR proposal that could impose port entrance fees (USD1.5 million per port call - or even USD3.5 million in extreme scenarios) on Chinese-built vessels entering U.S. ports. Since the stock was at an all-time high, up more than 150% since 2 years prior, investors likely saw that as a good excuse to take profits.
But IMO, the reaction looks overblown, especially since it happened as YZJ was posting the mega 2H2024 results. To me, that reaction feels exaggerated:
Proposal Status: Still under review. We don’t know if or how strictly it might be enforced. As we've seen with tariffs, today the U.S. may promise to impose some and tomorrow they may back off, so...
Supply inelasticity: China accounts for nearly 50% of global shipbuilding capacity. You can't migrate that overnight. By the time we could see any effect from this (if imposed), we're probably in a new presidential term in the U.S. already.
Passing on Costs: In reality, shipping companies will likely recoup added port fees through surcharges. That’s just what happens in practice in a supply-challenged industry.
The takeaway: A 30% drop on such a “maybe” policy seems dramatic. Thus, if anything, to me, that is just a 30% sale discount on the price I would have paid only a month ago.
Conclusion
YZJ is possibly the best-managed private shipbuilder in the country (China) that supplies nearly half the world’s ships.
With its yards heavily booked into 2030, YZJ’s forward revenue and earnings are almost certain to hit new all-time highs for the foreseeable future.
It has a strong balance sheet, with nearly half its market capitalisation being net cash.
The latest 30% share price dip from all-time highs pushed its valuation toward the bottom of its historical range - and the reason behind that slump feels iffy at best.
I’ve held YZJ shares for a while, but I used the recent drop to enlarge my stake (my average is now at S$2.16). I see them as a long-term keeper - likely decades - given the megatrend on global trade (despite the political rhetoric and tariff talks since Trump's election, global trade remains an undeniable megatrend). If you’re hunting for undervalued industrials outside the usual sexy tech sphere, YZJ might be a ship worth boarding.
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