[Hot Spot Focus] Moody's downgrades Lujin rating to "negative". Due to weaker contract sales than expected and the decline in financing capacity
htmlOn October 8, Moody's downgrades the rating outlook of RT Infrastructure Co., Ltd. and its wholly-owned financing tool from stable to negative. The negative outlook reflects weaker than expected contract sales in a difficult operating environment and a decline in the ability to raise huge unsecured long-term financing, which reduces its financial flexibility.
At the same time, Moody's also confirmed that Lu Jin's "Ba3" company family rating (CFR) and the company's full-funded financing tool "Ba3" support advanced unsecured ratings. The report believes that Lu Jin's "Ba3" CFR reflects the company's cautious attitude towards land acquisition and financial management in real estate development. The rating also takes into account the company's past record of maintaining adequate liquidity throughout its business cycle, as well as the stable cash flow for its toll road investments.
Due to tight financing conditions and weak confidence in home buyers, Lu Jin's contract sales will drop from RMB 49 billion in 2021 to RMB 34 billion in 2022 and RMB 30 billion in 2023, respectively. These factors will weaken the company's operating cash flow and liquidity. Despite the challenging financing conditions, Moody's expects Road Power to maintain sufficient liquidity in the next 12-18 months. Moody's believes that Lujin Infrastructure's toll road business will help alleviate volatility in its real estate development business, but is unlikely to upgrade its rating in the near term. If Lujin Infrastructure Co., Ltd. improves sales and financial indicators, strengthens opportunities for long-term financing, and maintains sufficient liquidity. Moody's may adjust its rating outlook to stable.
[Finance Analysis]
At present, the macroeconomic operation is facing the "triple pressure" of contraction of demand, supply shock and weakening expectations. Although real estate sales have recovered during the National Day holiday, my country's real estate companies have a large scale of non-performing assets.
Most of the non-performing assets in real estate
As of now, the scale of non-performing assets in my country's real estate industry is 2.08 trillion yuan, and the number of insurance companies involved has exceeded 30. At the enterprise level, the debt default of some enterprises caused panic among investors, bond financing has been "halved", and cash flow is under tremendous pressure. At the same time, developers with a "financing gap" are facing liquidity crisis and "insolvent". How to help enterprises resolve debt risks, accurately summarize non-performing assets and tap surplus value and investment returns during the downturn in real estate, is an inevitable problem for major financial institutions and real estate companies.
The current non-performing asset market is "uneven quality", and it is difficult for the market to provide a completely accurate valuation. For non-performing assets with large appreciation space and potential cash flow, asset management companies, real estate companies and other institutions choose the best asset restructuring, restructuring model, and to improve corporate governance methods to improve the revenue of the entire project. For non-performing assets with long-term value, the "debt-to-equity conversion" model can be adopted.
"Mergency and acquisition" in the capital market of real estate companies has also attracted more and more attention
Since 2015, real estate mergers and acquisitions have begun to form a scale, with the number exceeding 45 in 2021 and the amount exceeding 37 billion yuan. Up to now, the merger and acquisition market has shown the characteristics of the integration and expansion of leading enterprises with excellent capital conditions and the acceleration of mergers and acquisitions of property enterprises. In the acquisition and acquisition of real estate companies in 2021, buyers are concentrated in leading companies, such as Longfor , Vanke , China Merchants Shekou , Country Garden and other super-large real estate companies.
It is worth noting that nearly 30% of the projects are currently developed by multiple companies, but when one of the companies or projects is insufficient liquidity, it is difficult for other participating real estate companies to "stay safe alone". Whether high-quality companies are willing to acquire dangerous projects or difficult companies has become unknown.
[Finance Cases]
In the context of the continuous decline in real estate, from the central government to the local government, all parties have continued to make efforts from the policy end, and supportive policies on real estate have been gradually implemented, gradually improving market expectations. Many real estate companies have also used guaranteed financing and equity financing to achieve financing.
Case 1: Guorui Real Estate affiliated provides a guarantee for a 300 million yuan loan for Beijing Jiangong Road and Bridge
htmlOn October 7, Guorui Real Estate Co., Ltd. issued an announcement to provide financial assistance for transactions that must be disclosed.
The company's wholly-owned subsidiary Beijing Wangangtong entered into a guarantee agreement with Beijing Jiangong Road and Bridge Group Co., Ltd. (borrower). Beijing Wangangtong provides the borrower with the borrower as the beneficiary through the following methods: mortgage the property to Xiamen International Bank ; mortgage rental income and other receivables from the property to Xiamen International Bank; and provide joint and several liability guarantees for repaying the Xiamen loan, which will facilitate the borrower to obtain a loan of up to 300 million yuan provided by Xiamen International Bank. In return, Beijing Wangangtong will charge borrowers an annual guarantee fee of 1% of the actual withdrawal amount of money from the borrower under the Xiamen loan.
Case 2: Jianfa Real Estate plans to transfer 100% of the equity of Shanghai Shanxidi Real Estate. The reserve price has not been disclosed yet.
htmlOn October 8, according to the public announcement of Shanghai United Property Exchange , Jianfa Real Estate Group Co., Ltd. plans to transfer 100% of the equity of Shanghai Shanxidi Real Estate Development Co., Ltd., and the transfer reserve price has not been disclosed yet.
Shanghai Shanxidi Real Estate Development Co., Ltd. is a medium-sized real estate company with a registered capital of 370 million yuan. Jianfa Real Estate Group Shanghai Co., Ltd. holds 80% of the shares and Jianfa Real Estate Group Co., Ltd. holds 20% of the shares.
In addition, the listing information shows that the transferor may make adjustments to the transfer subject matter and its basic situation, the transferee's qualification conditions, etc. according to the actual situation.
[Financial Analysis] Taking real estate listed companies as an example
China Wuyi Industrial Co., Ltd. (hereinafter referred to as "China Wuyi") is a large-scale capital, technology and management-intensive enterprise based on the real estate industry, focusing on investment and development, and dominated by the outward-oriented economy. The company's main business scope: domestic and foreign real estate investment and development, property management; domestic and foreign engineering contracting; domestic and foreign investment and establishment of industries; capital operation, financing, BOT; high-tech development, cooperation; decoration and decoration; international trade , import and export of building materials and equipment; international economic and technological, labor cooperation, etc.
China Wuyi has established subsidiaries, joint ventures and branches in Hong Kong, Macao, the Philippines, Malaysia , Australia, the United States, Canada, Kenya and Benin , as well as Beijing, Shanghai, Nanjing, Changchun, Chongqing, Wuhan, Shenzhen, Fuzhou, Xiamen, Quanzhou , Zhangzhou , Nanping and other cities.
. Financing timing analysis
(I) Investment value analysis
On August 25, Wuyi, China released the 2022 semi-annual report. In the first half of 2022, Wuyi Industrial achieved operating income of 1.668 billion yuan, a year-on-year decrease of 41.77%; total profit of 28.4539 million yuan, a year-on-year decrease of 81.83%; net profit of 7.2172 million yuan, a year-on-year decrease of 91.57%.
net profit attributable to the parent company owner was RMB 15.9522 million, a year-on-year decrease of 50.75%; total assets were RMB 23.38 billion, and net assets attributable to shareholders of listed companies were RMB 5.173 billion.
In terms of operating income
achieved operating income of real estate business of 428 million yuan, with a gross profit margin of 36.98% in this period, with a newly started construction area of 138,200 square meters and a construction area of 1.283,300 square meters.
In terms of real estate business
China Wuyi Industry is focusing on the potential of urban development and regional company integration. Against the industry background of the relatively cautious land transaction market, it successfully won the high-quality land plot in Ningde urban area for 520 million yuan in May, increasing land reserves by 49 mu; in July, it successfully won the NO.2022G47 land plot in Jiangning District, Nanjing for 1.17 billion yuan, increasing land reserves by 46.38 mu, laying a good foundation for achieving sustainable development.
(II) Corporate value evaluation
Company valuation is the prerequisite for investment, financing and transactions, which is conducive to the correct evaluation of the company's intrinsic value, thereby establishing the pricing of the company's various transactions.
Chart 1: China Wuyi Industrial Co., Ltd. Value Assessment Table
Price-to-earnings ratio (PE) is the ratio of stock market price and earnings per share. As of 15:00 on October 9, 2022, the price-to-earnings ratio of Wuyi in China was 149.18, and the price-to-earnings ratio of similar companies in the industry was 61.7, which means that the company has strong operating capabilities.
price-to-book ratio (PB) is the ratio of the stock market price to the net assets per share. As of 15:00 on October 9, 2022, the price-to-book ratio of Wuyi in China was 0.92, and the price-to-book ratio of similar companies in the industry was 1.74, indicating that the assets with a book value of , 1 yuan in the capital market were valued at 0.92 yuan, and the company's valuation was relatively low.
(III) Financial environment analysis
htmlOn August 24, the State Council held an executive meeting pointed out that the current economy continues to recover and develop in June, but the recovery foundation is not solid. We must implement policies in a timely and decisive manner, continue to release the reform and transmission effects of loan market quotation rate , reduce financing costs, and maintain a reasonable policy scale. The meeting said that while implementing the package of policies to stabilize the economy, 19 consecutive policies will be implemented to form a combination effect, promote the economy to stabilize and improve, keep operating within a reasonable range, and strive for the best results, mainly including increasing the quota of more than 300 billion yuan of policy development financial instruments, and making good use of the balance limit of more than 500 billion yuan of special bonds in accordance with the law; allowing local ", one city, one policy " to use credit and other policies to reasonably support rigid and improved housing needs.
In addition, the LPR lowering has led to a downward trend in mortgage interest rates, and the loan restriction policy in multiple cities has been relaxed. Multiple ministries and commissions jointly promoted the policy bank special loans, and Zhengzhou, Nanning , Hubei and other places have set up special relief fund to make every effort to "ensure the delivery of buildings and stabilize people's livelihood."
On the other hand, the policy supports high-quality real estate companies to issue credit enhancement or guaranteed bonds to help real estate companies restore normal credit capabilities. The interest rate level of a typical private enterprise's bond issuance has also been reduced to no more than 4%.
. Enterprise capital needs
(I) Liability structure analysis: Current liabilities account for a large proportion of Enterprise liquidity is strong
In the second quarter of 2022, in the liability structure of China Wuyi Industrial Co., Ltd., the current liabilities were RMB 13946.1837 million, mainly distributed in short-term loans. The non-current liabilities paid within one year , accounts payable and tax payable, respectively, accounted for 15.02%, 11.79%, 8.73%, and 6.10% of the company's total liabilities; the non-current liabilities were RMB 3835.0369 million, mainly distributed in long-term loans. The non-current liabilities were RMB 15.70% and 5.71% of the company's total liabilities respectively.
Company debt mainly comes from current liabilities. In the company's current liability structure, short-term loans account for a large proportion, indicating that corporate liabilities is mainly concentrated in the financing links in current liabilities.
Chart 2: Liabilities composition chart
(II) Changes in liabilities: Total liabilities increased by 0.05% compared with the same period last year
In the second quarter of 2022, the total liabilities of China Wuyi Industrial Co., Ltd. was RMB 1778.12206 million, an increase of RMB 0.05% over the same period last year, mainly due to the growth of current liabilities.
Current liabilities in the second quarter of 2022 increased by 1.33% compared with the same period last year. Specifically, the items that increased current liabilities include: non-current liabilities due within one year increased by 431.4709 million yuan, accounts payable increased by 100.6078 million yuan, short-term loans increased by 84.9696 million yuan, and other current liabilities increased by 47.5467 million yuan, totaling 6 64.595 million yuan; items that reduce current liabilities include: other payables reduced by RMB 572.6828 million, taxes and fees paid by RMB 257.9921 million, not payable by RMB 106.1731 million, dividend payable by RMB 93.8299 million, employee payable by RMB 17.4585 million, and advance payments decreased by RMB 6.4041 million, total reduction of RMB 105.45404 million. The increase and decrease items are offset, increasing the total current liabilities by RMB 182.688 million.
Non-current liabilities in the second quarter of 2022 decreased by 4.36% compared with the same period last year, of which deferred income tax liability increased by 9.3993 million yuan, and the liabilities are expected to increase by 8.1627 million yuan, a total of 17.5620 million yuan; long-term loans decreased by 110.3817 million yuan, and bonds payable decreased by 80.5307 million yuan, a total of 190.9125 million yuan. The increase and decrease items were offset, reducing the total amount of non-current liabilities by RMB 174.6651 million.
3. Financing conditions
(I) Asset scale analysis: Enterprises have strong liquidity and basically stable competitiveness
. Asset composition: Current assets account for a large proportion and enterprises have strong monetization capabilities
China Wuyi Industrial Co., Ltd.'s total assets in the second quarter of 2022 were 2337,991.09 million yuan. Among them, current assets are RMB 21616.484 million, mainly distributed in inventory, cash, accounts receivable, and other current assets, accounting for 66.61%, 15.66%, 4.98% and 3.89% of the company's total current assets; non-current assets are RMB 176.34269 million, mainly distributed in fixed assets and investment real estate, accounting for 35.78% and 33.84% of the company's total non-current assets, respectively.
Chart 3: Asset composition chart
. Asset structure rationality evaluation: The development and innovation ability has not changed much, and the overall competitiveness of enterprises is relatively stable
By comparing the sales revenue, interest and tax profits and the proportion of asset composition and total assets in the second quarter of 2022 and the second quarter of 2021, the changes in 5 indicators are obtained, and the specific explanation is as follows: Asset Remuneration The rate is basically unchanged, indicating that the level of benefit for the unit asset acquisition of enterprises is relatively stable; the turnover rate of total assets is basically unchanged, indicating that the turnover days change little, and the operation efficiency and sales capacity of enterprises are relatively stable; the current assets/total assets are basically unchanged, indicating that the liquidity, adaptability, opportunities for profit creation and development, and the potential for accelerating capital turnover are relatively stable; the long-term investment/total assets are basically unchanged, indicating that the proportion of strategic investment in enterprises is basically stable, the asset appreciation capacity is stable, and the pressure on enterprise funds does not change much, and the liquidity of assets does not change much; the intangible assets/total assets does not change much, indicating that the development and innovation capacity does not change much, and the comprehensive competitiveness of enterprises is relatively stable.
(II) Debt repayment ability: Short-term debt repayment ability weakened
. Current ratio analysis: The ability of enterprises to repay current liabilities of current assets remains basically unchanged
China Wuyi Industrial Co., Ltd. current ratio from the second quarter of 2020 to the second quarter of 2022 was 146.77%, 158.93%, and 155.00%, respectively. Changes in the current ratio of enterprises showed a trend of rising first and then falling, and the decline in that year was lower than the increase last year.
China Wuyi Industrial Co., Ltd.'s current ratio in the second quarter of 2022 changed -3.93% year-on-year compared with the same period last year, with little change, indicating that the ability of enterprises to repay current liabilities of current assets remains basically unchanged. The main reason for the small change in the current ratio is that the current assets of enterprises remain basically unchanged, the current liabilities have increased, and the growth rate of current liabilities is small.
Chart 4: Current ratio trend change chart
. Debt-of-asset ratio analysis: The asset protection ability to liabilities remains basically unchanged
China Wuyi Industrial Co., Ltd.'s debt-of-asset ratio from the second quarter of 2020 to the second quarter of 2022 was 75.80%, 75.13%, and 76.05%, respectively. The changes in the debt-of-asset ratio of enterprises showed a trend of decline first and then rising, and the fluctuation was rising, and the increase in that year was slightly higher than the decline last year.
China Wuyi Industrial Co., Ltd.'s debt-to-asset ratio in the second quarter of 2022 changed by 0.92% year-on-year compared with the same period last year, with little change, indicating that the asset's ability to protect liabilities has remained basically unchanged. The main reason why the debt-to-asset ratio did not change much in the second quarter of 2022 is that the total amount of corporate liabilities remained basically unchanged and the total amount of assets remained basically unchanged.
Chart 5: Debt-of-asset ratio trend change chart
(III) Profitability analysis: The profit level of the enterprise has declined
. Analysis of profit margin indicators based on sales revenue
China Wuyi Industrial Co., Ltd.'s gross sales profit margin in the second quarter of 2022 was 11.49%, sales profit margin was 1.88%, and net sales profit margin was 0.43%. Compared with the same period last year, the sales profit margin and net sales profit margin have not changed much, but the gross sales profit margin has declined, indicating that the cost control level of the main business has declined. Enterprises should pay attention to the cost control of daily business activities.
Chart 6: Changes in sales gross profit margin, sales profit margin and net sales profit margin
. Analysis of the ratio of cost expenses and total profit
China Wuyi Industrial Co., Ltd. in the second quarter of 2022 Cost expense profit margin was 1.68%, which was not much change compared with the same period last year, with a year-on-year change of -3.97%. The factors affecting the changes in the cost and expense profit margin are: the total profit in the second quarter of 2022 was 28.4539 million yuan, with a growth rate of -81.83%; the total cost and expense in the second quarter of 2022 was 169.0536 million yuan, with a growth rate of -39.00%. While the total profit of an enterprise is greatly reduced, the total cost and expenses are greatly reduced, and the decline rate of the total profit is slightly faster than the decline rate of the total cost and expenses. This shows that the profitability of the company has not changed much.
Chart 7: Cost and expense profit margin change trend chart
