CH Auto; June Update, CH Shipbuilding; Initiation - OW on Songfa,CSSC, TW Drone Update; Hanwha Aero Feedback: APAC Industrial & Auto Sector Specialist Sales Commentary Auto & EV - Equipment - Machinery - F&C - AGD

Research evidence excerpt

CH Auto; June Update, CH Shipbuilding; Initiation - OW on Songfa,CSSC, TW Drone Update; Hanwha Aero Feedback: APAC Industrial & Auto Sector Specialist Sales Commentary Auto & EV - Equipment - Machinery - F&C - AGD

ing exposure to China’s shipbuilding sector, initiating Overweight on

Guangdong Songfa Ceramics (TP: Rmb210) and China CSSC Holdings (TP: Rmb45), and assuming coverage of

Yangzijiang Shipbuilding (TP: S$3.4, Neutral).

• The market is underestimating the sector’s long-term earnings power, as existing orderbooks provide multi-year visibility

(with Chinese yards filling 2029–30 slots), industry fundamentals remain tight (scheduled deliveries expected to increase

c.37% during 2025–27 vs. only +9% of global dock capacity growth during 2025–29), and higher signing downpayments

(now 15–40%) highlight a persistent seller’s market.

• Demand is rotating across vessel classes, and IMO delays defer rather than destroy replacement demand (future

demand should increasingly be supported by tankers, LPG/LNG carriers, and bulk carriers). Today’s cycle is different, with

disciplined capacity growth, productivity gains, and stronger commercial discipline reducing boom-bust risk.

• JPM Picks: We prefer Songfa for capacity expansion and marine engine optionality, CSSC for SOE reform and defense

exposure, and YZJ as a quality compounder.

• Key catalysts include 1H26 results, filling 2029–30 slots, and SOE reform/defense developments. Risks include Red Sea

reopening, weaker global trade, and Rmb appreciation.

• Investor Feedback & Sales View: Investors' discussion on Korean Shipbuilding during Simon Han’s marketing in HK this

week was focused on the commercial vessel order cycle (investors expect the order cycle to peak this year and see a decline in