Dajin Heavy Industry (002487) Report Interpretation

Overview

UBS reviews Dajin Heavy Industry’s Q2 results and reduced outlook for overseas offshore-wind orders. The report concludes that weaker delivery timing, FX losses and a much thinner order backlog reduce earnings visibility and constrain growth in 2027-28E, outweighing the longer-term opportunity in shipbuilding and marine transportation.

Core views

UBS downgraded Dajin from Buy to Neutral following a Q2 miss and lower visibility on new orders. Q2 net profit was Rmb165m, down 47% year on year and 62% quarter on quarter. UBS attributes the miss mainly to delayed shipping schedules that reduced revenue recognition and to Rmb90m of FX losses in H126, compared with Rmb110m of FX gains in H125. Excluding FX, H126 net profit would have risen 57% YoY, but the report views the near-term earnings pressure and order outlook as more consequential for the investment case. The central concern is offshore-wind order intake. Year-to-date intake significantly missed management’s prior Rmb20bn guidance, which management linked to slower European tender progress amid policy transitions and wind-turbine capacity constraints. Management expects tender activity potentially to improve in H226 and Q127 in the UK, France, the Netherlands and Germany. UBS nevertheless notes that backlog had declined to several billion yuan at end-June from Rmb10bn at end-2025 and that floating-foundation orders may fall short. As a result, UBS sees little support for top-line growth in 2027-28E and lowers its forecast for overseas wind-foundation shipment growth in 2026-28 to a 15% CAGR from 42% previously. The revised operating assumptions drive substantial forecast cuts. UBS now expects overseas foundation volumes of 253k tonnes in 2026E, 278k tonnes in 2027E and 334k tonnes in 2028E, reflecting slower project bidding. It reduces EPS by 22% for 2026E, 36% for 2027E and 45% for 2028E. The revised model forecasts revenue of Rmb7.445bn, Rmb10.831bn and Rmb16.048bn for 2026E-28E, with diluted EPS of Rmb2.29, Rmb2.81 and Rmb3.53, respectively. UBS retains a constructive long-term view of the shipbuilding business, which it believes can complement offshore-wind foundations through higher-value-added transportation and engineering services. Dajin secured Rmb12bn of external shipbuilding orders year to date for delivery in 2027-30E, and its King One and King Two marine transport ships have begun operating, with King Three scheduled for commissioning in September. UBS estimates marine transport earnings accretion of roughly Rmb1,300 per tonne and expects shipbuilding revenue of Rmb2.5bn in 2027E and Rmb6bn in 2028E. However, the business is expected to account for only around 14% of total gross profit in 2027E, so its near-term profit contribution is likely to remain muted. On valuation, UBS cut its DCF-based target price from Rmb100.00 to Rmb39.00 while slightly lowering WACC from 7.9% to 7.8%. The target implies 14x 2027E P/E. At 13x 2027E P/E, UBS considers Dajin fairly valued: the multiple is near its historical trough but broadly comparable with wind-sector peers, and UBS believes it already reflects both shipbuilding upside and the weaker revenue-growth outlook.

Analysis framework

UBS first assesses the Q2 earnings miss and separates delivery-timing and FX effects. It then links the weaker European order pipeline and reduced backlog to lower offshore-foundation shipment, revenue and margin assumptions, incorporates a phased shipbuilding contribution, revises earnings forecasts, and values the company using DCF with peer P/E comparison as a reasonableness check.

Methodology notes

• Valuation methodsDCF (Discounted Cash Flow)

  DCF-based target price

  UBS discounts its projected cash flows using a WACC assumption to derive Dajin’s Rmb39.00 target price; WACC was changed from 7.9% to 7.8%.

• Industry AnalysisSupply-demand framework

  Offshore-wind tender, order backlog and shipment analysis

  The report connects European tender timing and turbine-capacity constraints to Dajin’s order intake, backlog, future overseas foundation volumes and revenue growth.

• Valuation methodsP/E and PEG Valuation

  P/E peer comparison

  UBS compares Dajin’s 2027E P/E with wind-sector peers to judge whether the post-cut valuation is fair.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Dajin Heavy Industry (002487.SZ)

  Primary covered company; weaker offshore-wind order visibility drives the downgrade.

  Strengths

  Cost advantages in overseas offshore-wind monopiles, value-added marine transportation services, and Rmb12bn of external shipbuilding orders.

  Weaknesses

  Reduced backlog, delayed shipping schedules, FX losses and limited near-term shipbuilding earnings contribution.

  Comparison

  Trades at 13x 2027E P/E, broadly in line with wind-sector peers; UBS’s target implies 14x 2027E P/E.

  Risks

  Slower capacity additions, higher steel prices, and more-open ports that could increase competition and lower ASPs.

Key data

• Q2 net profitRmb165mDown 47% YoY and 62% QoQ; below market expectations.
• H126 FX impactRmb90m lossCompared with Rmb110m FX gains in H125.
• Prior order-intake guidanceRmb20bnYTD intake significantly missed this guidance.
• Order backlogSeveral billion yuan at end-JuneDown from Rmb10bn at end-2025.
• Overseas foundation shipment CAGR15% in 2026-28ECut from UBS’s prior 42% forecast.
• EPS revisions-22% / -36% / -45%For 2026E / 2027E / 2028E, respectively.
• External shipbuilding ordersRmb12bnSecured YTD and scheduled for delivery during 2027-30E.
• Target priceRmb39.00Cut from Rmb100.00; DCF-based and implies 14x 2027E P/E.
• 2027E P/E13xUBS considers this fair and broadly in line with peers.

Impact & implications

UBS believes the weaker order pipeline caps Dajin’s earnings and revenue-growth potential in 2027-28E despite long-term European offshore-wind demand and a potentially meaningful future contribution from shipbuilding. The report regards the current valuation as already reflecting both the shipbuilding opportunity and the weakened growth outlook.

Risks

• Slower-than-expected onshore and offshore capacity additions could reduce wind-tower demand.
• Higher steel prices could squeeze margins.
• Opening more ports could lower entry barriers, intensify competition and pressure ASPs.
• UBS also identifies sector risks from delayed installations, reduced provincial subsidies for offshore wind and further turbine-ASP declines.

What to watch

• The pace of offshore-wind tenders in Europe, particularly in the UK, France, the Netherlands and Germany.
• Whether Dajin can rebuild offshore-wind order intake and backlog in H226 and Q127.
• Commissioning and earnings contribution from King Three and additional marine transportation ships.
• Timing of revenue recognition from Rmb12bn of shipbuilding orders scheduled for 2027-30E.
• Potential for more overseas monopile orders, identified in UBS’s short-term catalyst assessment.