Now, let’s address the various concerns I have with regards to investing in YZJ:
1) Falling margins for shipbuilding
Most of the fat contracts secured during the boom years in 2007-2008 are over. One should not expect margins to be fat today but I doubt we will see a free-fall in margins. YZJ's latest quarter's margin is about 20% for its core shipbuilding segment which is low by historical standards but if we compare it with Chinese peers, it’s not bad at all. Management has mentioned they will not drastically lower prices to secure deals. Although I take their word with a pinch of salt, the numbers seem to bear this out too.
2) Operation and execution risk
One of the bigger deals undertaken by YZJ that is due for delivery is the 10,000 TEU container ship. One should closely monitor the delivery as any prolong delay or problems after delivery will be serious, and I ...
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