China Rongsheng Heavy Industries Group Holdings Ltd , the country's largest non-state-owned shipbuilder, will achieve or even exceed its $3 billion new order target in 2011 with a slew of talks on orders for bigger vessels taking place, its CEO said, Guardian reports.
Controlled by chairman Zhang Zhi Rong, ranked the 7th richest person in Hong Kong by Forbes, Rongsheng secured $1.3 billion in new orders in the first half, up 50 percent from a year ago despite weak demand amid a glut in the bulk carrier market.
"With the orders now in discussions, we will at least meet or even exceed our target," CEO Chen Qiang told Reuters on Tuesday at his office overlooking Hong Kong's Victoria harbour, once the world's busiest container port.
Rongsheng received orders for 24 vessels, including four ships that can carry 6,600 twenty-foot-equivalent units (TEU) of containers each, from January to June and is expected to clinch more container ship projects for the rest of the year, including larger 10,000-TEU vessels, Chen said.
Rongsheng, which competes with China's state-owned giants -- China Shipbuilding Industry Corp and China State Shipbuilding Corp, has also reaped benefits from government policies to strengthen the shipbuilding industry.
China was the world's largest shipbuilding country in 2010, surpassing South Korea and Japan in terms of output, new orders and orders on hand.
"China is the biggest but not yet the strongest shipbuilding country," Chen said.
Only listed last November, China Rongsheng's shares have lost over a third of its value from its initial public offering price of HK$8 on concerns over delayed deliveries and slowing orders.
Reflecting an overall weak market, the Baltic Exchange's main sea freight Index , which tracks rates to ship dry commodities, has fallen 24 percent this year on worries over the global economy and an oversupply of ships.
However, shares of Rongsheng have rebounded 38 percent from a record low in June, closing at HK$5.26 on Tuesday, as some analysts deemed it oversold previously.
"It got a relatively high PE as the market was good when it was listed," said Lawrence Lau, an analyst at BOCI Research.
Rongsheng is trading at under 8 times 2011 earnings, a tad higher than Singapore-listed Yangzijing's 7.3 times, but lower than state-owned China CSSC Holdings , which is at 18 times.
Although the stock rebounded on valuation after hitting a bottom in June, it would need new catalysts for further growth.
VALE'S ORDERS SAFE
Chen, who founded the company together with Zhang and Zhang's father in 2005, said Rongsheng had $7 billion worth of orders on hand, which will fill up its yards until 2014.
Rongsheng makes bulk carriers, crude oil tankers, container ships, offshore engineering products and engines, with its customers including Cardiff Marine Inc, Frontline Ltd , Geden Lines and China National Offshore Oil Corp (CNOOC).
It is building 12 very large ore carriers (VLOCs) of 400,000 dwt (dead weight tonnage) each, the largest dry bulk ship, for Vale .
Although the company has scaled down its 2011 delivery target of the VLOCs to 2-3 from eight in its listing documents, Chen quashed speculation that Vale may cut the order size or alter some of the orders to smaller ships.
A big portion of Vale's profit came from China last year, he said. "Why would they want to offend China?" he said.
Chinese banks provide huge amounts of loans to Vale and the Brazil miner has also forked out downpayments of between 20 and 80 percent for these ships, Chen added.
Vale said it rerouted its China bound VLOC Vale Brazil to Italy on its maiden voyage last month for commercial reasons and to allow time to finalise talks for future port deals.
Chen said Rongsheng named and launched its first VLOC for Vale earlier this month and actual delivery was set in September. After that the ship would sail in Chinese waters and berth in Chinese ports.
Vale was interested in cooperation with Chinese shipping companies, such as leasing those VLOCs to Chinese firms for them to operate, Chen added.