Longfor Group: This year's debt pressure has passed

On August 18, Longfor Group released its 2023 half-year report and held a performance briefing.

During the reporting period, the company achieved a total turnover of 62.04 billion yuan, compared with 94.805 billion yuan in the same period of the previous year, and profit attributable to shareholders was 8.06 billion yuan, compared with 7.48 billion yuan in the same period of the previous year. In the first half of the year, Longfor Group achieved a year-on-year increase of 15% in real estate development contract sales to 98.52 billion yuan, and the sales collection rate exceeded 100%.

Chen Xuping, chairman and CEO of Longfor Group, said at the performance briefing that in the first half of the year, Longfor Group made sufficient preparations on the supply side, and the supply of goods available for sale in the first half of the year reached 240 billion yuan, and 80 billion yuan of new supply sources could enter the market in the second half of the year. It can provide more than 320 billion yuan of sellable goods throughout the year.

The dematerialization rate of new projects reached 70%

"The removal rate of new projects of Longfor Group has reached 70%, and the company also pays special attention to inventory projects, especially some existing housing projects, and strives to convert inventory into cash flow. In the first half of the year, the performance of high-level cities such as Chengdu, Tianjin, Hefei and Suzhou was good, which drove the overall improvement of the group's performance. Longhu has 26 cities that rank in the top 10 for sales. Chen Xuping said at the meeting.

According to the half-year report of Longfor Group, in the first half of the year, Longfor Group achieved a year-on-year increase of 15% in real estate development contract sales to 98.52 billion yuan. In terms of sub-regions, the sales value of the Yangtze River Delta, Western China, Bohai Rim, South China and Central China accounted for 29.5%, 26.4%, 22.7%, 12.3% and 9.1% of the whole group respectively. Among them, sales in first- and second-tier cities accounted for 95%.

The management of Longfor Group said at the meeting that Longfor adjusted and created a series of products suitable for improving sexual needs in response to the improvement needs. Among them, the improved products created in Chengdu are close to 100% open; The improved products created in Shanghai have opened more than 90%.

For product pricing, the management of Longfor Group said that the pricing of real estate must follow the strategy of "one price per city, one price per plate", and will not be sold by fire sale for the sake of deification.

During the reporting period, the company's gross profit was 13.9 billion yuan, and the gross profit margin was 22.4%, which was at the leading level in the industry.

The management of Longfor Group said at the meeting that during the reporting period, the gross profit margin of Longfor Smart Life and other businesses was higher, which helped the company's gross profit margin increase.

According to the half-year report of Longfor Group, during the reporting period, the real estate development business performed steadily, achieving a turnover of 49.87 billion yuan and a total construction area of 3.832 million square meters of delivered properties. In the first half of the year, the Group delivered 84 projects and 62,000 units, 100% of which were delivered on schedule. At the same time, Longfor launched services such as "cloud delivery" and "delivery is delivery".

Open up new growth tracks

The management of Longfor Group said that in the face of the new situation of major changes in the supply and demand relationship in China's real estate market, Longfor will accelerate the construction of a high-quality development model: focusing on the three major businesses of development, operation and service, giving full play to the synergy effect of the "1+2+2" waterway, so that the group's profit structure will be gradually optimized, and the proportion of non-development business profit will increase to more than half. At the same time, it has steadily reduced the scale of the Group's interest-bearing liabilities, achieved endogenous growth with positive operating cash flow, and continued to optimize and improve asset quality, making the Group's overall development more stable and sustainable in the future.

According to the half-year report of Longfor Group, in the first half of 2023, the operating income of Longfor Group, consisting of operation and service business, reached 12.2 billion yuan (excluding tax), a year-on-year increase of 10.4%, with operating profit accounting for more than half, and the profit structure was more optimized. The rental income of the operating segment excluding tax in the first half of the year was RMB6.33 billion. Commercial investment, long-term rental apartments and other income accounted for 77.0%, 19.4% and 3.6% respectively.

In terms of commercial investment, the financial report shows that 5 new shopping malls were operated in the first half of the year, of which 2 were asset-light, both light and heavy, and continued to deepen the grid layout in core cities.

Benefiting from the recovery of consumption and the continuous innovation of Longfor Commerce in space layout, brand investment, marketing promotion and other aspects, the occupancy rate has steadily recovered, the same-store turnover and the average daily customer flow of the same store have increased by more than 20% compared with the same period last year, and the rental income increased by 8% year-on-year to 5.01 billion yuan. As of the end of June 2023, Longfor Commercial has entered 32 cities across the country, with a total of 81 operating malls, a total operating construction area of 7.62 million square meters (including a total construction area of 9.8 million square meters including parking spaces), an overall occupancy rate of 95.4%, more than 6,500 cooperative brands and more than 400 strategic cooperative brands.

Regarding the question of when Longfor Smart Life will be listed, the management of Longfor Group also revealed at the performance meeting: "Listing is not the ultimate goal, the important thing is that Longfor Smart Life's business continues to maintain healthy development. ”

The bank side is the main financing force

According to the financial report, as of the end of June 2023, the total comprehensive borrowing of Longfor Group was 207.09 billion yuan, with a steady decline in scale; the average borrowing cost was 4.26%, maintaining the low level of the industry; The debt structure remained reasonable, with an average loan tenure of 7.19 years, further lengthened; the net debt ratio was 57.2%, the cash short-debt ratio was 1.96, and the asset-liability ratio excluding advance receipts was 61.9%, a new low in the past five years, and met the "three red lines" requirements for seven consecutive years, and a series of indicators maintained a high level in the industry.

Zhao Yi, executive director and CFO of Longfor Group, said at the meeting that Longfor has recently participated in some surveys and discussions organized by the central bank and the China Securities Regulatory Commission, and the concern and support of leaders of various regulatory levels for private enterprises at the meeting is very obvious. Longfor has also rolled out financing strategies under the general policy system, and the bank end is the main financing force of Longhu. As of the first half of the year, bank financing accounted for 55%, laying the foundation for the company's long-term development.

According to the financial report, as of the end of June 2023, Longfor Group's comprehensive loan amount was 207.09 billion yuan, and the cash on hand was 72.43 billion yuan. The net gearing ratio was 57.2%, and the gearing ratio after excluding advance receipts was 61.9%. From the perspective of debt structure, the average loan term of Longfor Group is 7.19 years, of which the debt due within one year is 37.04 billion yuan, accounting for 17.9% of the total debt.

As for the land reserve, Longfor Group said that it added 20 new sites in the first half of the year, distributed in first-tier and strong second-tier cities such as Shenzhen, Shanghai, Guangzhou, Chengdu, Hangzhou and Suzhou. The total construction area of the new land reserve is 2.57 million square meters, and the equity area is 1.84 million square meters. As of the end of June 2023, the Group's total land reserve reached 54.89 million square meters, and the equity area was 38.16 million square meters, with 87% of the value of goods concentrated in high-level cities and value areas.

Management: The debt pressure has passed this year

Data show that from July to August 2023, Longfor has repaid a total of 8.37 billion yuan of corporate bonds. So far, Longfor Group's domestic corporate bonds due in 2023 have basically been repaid, leaving only 119 million yuan due in November. In addition, the Company has also prepaid HK$7.2 billion of its HK$15.3 billion syndicated loan due in January 2024 and plans to fully prepay the remainder within the year. As of the end of 2026, Longfor has no bonds maturing overseas.

Zhao Yi, CFO of Longfor Group, said that the debt pressure of Longfor this year has passed, and there is about 8 billion Hong Kong dollars left in the syndicated loan due next year, and we are planning to repay it step by step. Longhu's maturing debt may be about 23 billion yuan next year, and the company has sufficient resources to repay, of which development loans are expected to be issued more than 10 billion yuan next year, operating property loans are expected to increase by more than 10 billion yuan, and China debt credit may be issued 2 billion to 3 billion yuan, which can repay the debts due next year.

According to CICC's research report, Longfor is a leading comprehensive development operator in the industry, which ran through the "development + holding" model earlier, and derived space operation and management business on this basis. CICC is optimistic that Longfor will develop its main real estate development business steadily and diversify its businesses with the support of stable finances, which will help boost Longfor Group's profits and cash flow and help release valuation."

Editor: Zhang Zhixuan