Another "real estate central enterprise" was downgraded, and the credit index continued to weaken
When China Jinmao is in financial trouble, its largest shareholder, Sinochem Hong Kong, will provide special support.
01
demote
On April 18, Moody's transferred China Jinmao (00817. HK) downgraded its corporate family rating to Ba2 from Ba1, and downgraded its wholly-owned subsidiary's senior unsecured rating of US dollar notes from Ba1 to Ba2 and downgraded the rating of supported preferred shares to B1 from Ba3, which were unconditionally and irrevocably guaranteed by China Jinmao.
At the same time, Moody's maintained a negative outlook for the ratings.
Moody's ratings
Moody's said that China Jinmao's credit indicators will continue to weaken in a volatile market environment and are unlikely to return to levels commensurate with previous ratings in the next 1-2 years.
Moody's also expects special support from its largest shareholder, Sinochem Hong Kong, when China Jinmao is in financial trouble.
On December 6, 2023, Moody's just downgraded the issuer rating of China Jinmao "Baa3" to "Ba1", and the company's credit qualification has deteriorated rapidly in the short term, and it is facing certain refinancing pressure.
According to the statistics of "Small Bond Market", China Jinmao currently has 6 US dollar bonds with an existing scale of 2.6 billion US dollars, and two bonds with a total scale of 600 million US dollars will mature within a year.
Existing US dollar bonds
In terms of domestic bonds, they are mainly issued by Shanghai Jinmao Investment Management Group Co., Ltd. and China Jinmao (Group) Co., Ltd., which currently have bonds of 41.06 billion yuan and 2.1 billion yuan respectively.
02
Earnings loss
According to the official website, China Jinmao is one of the world's top 500 enterprises, and the platform enterprise of the real estate and hotel sector of Sinochem Group.
In 2007, China Jinmao was listed on the main board of the Hong Kong Stock Exchange.
China Jinmao official website
In terms of shareholding structure, the controlling shareholder of China Jinmao is Sinochem Group, which is one of the large state-owned enterprises supervised by the State-owned Assets Supervision and Administration Commission of the State Council.
In July 2019, Sinochem Hong Kong transferred 1.787 billion shares and 16 million shares of China Jinmao to a subsidiary of Ping An of China and New China Life Insurance for a consideration of HK$8.674 billion, and Jinmao placed another 169 million shares to Sinochem Hong Kong, making Ping An Life the second largest shareholder of the company after the completion of the transaction.
In recent years, Sinochem Hong Kong's stake has increased from 35.28% in 2021 to 36.4% in 2022, after China Jinmao increased equity dividends to preserve cash amid an unprecedented industry downturn.
Shareholding structure chart
In 2021, China Jinmao recorded a record high of 235.6 billion yuan in contracted sales, and in 2022, the company achieved 155 billion yuan in contracted sales.
In 2023, China Jinmao will achieve a cumulative contracted sales amount of 141.2 billion yuan, a year-on-year decrease of 8.9%.
In the first quarter of this year, China Jinmao's cumulative contracted sales amount reached 17.52 billion yuan, and the contracted sales construction area was about 954,000 square meters.
It can be seen that although affected by the downturn in the industry, China Jinmao's sales have also shown signs of weakness, but it will continue to maintain its current market position and sales ranking, and the contracted sales will reach 130 billion to 150 billion yuan in the next few years.
In terms of land reserves, China Jinmao will add 1.233 million square meters of equity land reserves in 2023, ranking 15th in the industry.
In 2023, China Jinmao will achieve revenue of about 72.403 billion yuan, a year-on-year decrease of 13%, and a net profit loss attributable to the parent company of 6.869 billion yuan, an increase of 448% year-on-year.
As for the reasons for the loss, China Jinmao said in the financial report that the provision for the impairment of properties under development and properties held for sale, the decline in gross profit due to the decline in the revenue and gross profit margin of some property development projects of the group and the decline in the amount of land development income, as well as the significant decline in one-time income from mergers and acquisitions and sales compared with 2022.
Net profit attributable to shareholders
In terms of profitability, China Jinmao's gross profit in 2023 will be about 9.021 billion yuan, a year-on-year decrease of 31%.
Due to the delivery of high-priced auction projects during the 2016-2017 period, China Jinmao's overall gross profit margin fell to 15.84% in 2022 and further to 12.46% in 2023.
Gross margin
As of the latest reporting period, China Jinmao's total assets were 407.119 billion yuan, total liabilities were 297.282 billion yuan, net assets were 109.837 billion yuan, and the asset-liability ratio was 73%.
Due to the downsizing of its operations, China Jinmao is likely to maintain a high level of leverage over the next two years.
Debt-to-asset ratio
According to the analysis of the debt structure of "Small Debt Market Watch", China Jinmao is mainly based on current liabilities, accounting for 60% of the total debt.
As of the end of 2023, China Jinmao's current liabilities were RMB176.09 billion, mainly other payables, and its short-term liabilities due within one year were RMB23.862 billion.
Compared with the pressure of short-term debt, China Jinmao has better liquidity, with 30.92 billion yuan of cash and cash equivalents on its books, which can cover short-term debt, and the company faces little risk of short-term debt repayment.
As of the end of 2019, the total credit line of China Jinmao Bank was 157.136 billion yuan, and its unused credit line was 87.381 billion yuan.
Bank credit
In addition, China Jinmao also has non-current liabilities of 121.192 billion yuan, mainly long-term loans, and its long-term interest-bearing liabilities are 103.517 billion yuan.
Overall, China Jinmao's rigid debt is 127.379 billion yuan, mainly long-term interest-bearing debt, with an interest-bearing debt ratio of 43%.
In 2023, China Jinmao's total interest expense was RMB8,146 million, an increase of 25% year-on-year, mainly due to the increase in both average loan amount and loan interest rate.
In terms of debt service funds, China Jinmao mainly relies on external financing. In addition to bond issuance and borrowing, it also provides financing through accounts receivable, equity financing, equity pledge and trust.
Although China Jinmao, as a state-owned enterprise, has smooth financing channels, its net financing cash flow in 2023 will be -10.907 billion yuan.
Net cash flow from financing
In terms of asset quality, China Jinmao's other receivables are relatively large, with an indicator of 65.309 billion yuan by the end of 2023, which not only occupies a large amount of funds, but also has a certain recovery risk.
In addition, in recent years, China Jinmao's minority shareholders' interests have increased year by year, but the net profit has decreased, or the repurchase of real debts with clear shares at maturity or the injection of new real debt plans with open shares has pushed up the scale of minority interests.
Overall, in 2023, China Jinmao's performance will suffer a significant loss, its ability to protect debt and interest will decline, its financing cash flow will outflow netly, and it will face certain refinancing pressure, and its other receivables will be large.
03
Earth King Harvester
For a long time, China Jinmao, which is dominated by luxury residential projects, is known for its strong product strength and high premiums, and has not been stingy in acquiring land, and has won a number of "land kings".
In 2009, China Jinmao auctioned No. 15 "Diwang" in Guangqumen, Beijing, and became famous in one fell swoop.
In 2016, China Jinmao participated in the acquisition of 12 land plots in Shanghai, Nanjing, Shenzhen, Tianjin, Hangzhou, Zhengzhou, Wuxi and Qingdao, with a total transaction price of 37.27 billion yuan.
However, after the volume and price of commercial housing rose and ebbed, the real estate companies that were keen to compete for high-priced "land kings" in the early stage directly became the biggest victims of the price limit.
In the years that followed, China's land acquisition slowed significantly.
From 2015 to 2018, China Jinmao's new land reserves were 1.82 million, 2.85 million, 9.32 million and 22.64 million square meters, respectively, and the new land reserves fell to 13.9 million square meters in 2019 and further decreased to 5.83 million square meters in the first half of 2020.
In 2020, Jin Mao began to sink to third- and fourth-tier cities to acquire land at a high premium, trying to exchange profit margins through land replacement.
During this period, Ping An's investment further broadened China Jinmao's diversified financing channels.
In March 2020, China Jinmao signed a financial services framework agreement with a subsidiary of Ping An of China, covering deposits, loans, entrusted loans, mortgage loans, settlement, factoring and other businesses, of which the balance of loans and financing poly services is capped at RMB10 billion and RMB3 billion respectively, and is valid until the end of 2020.
However, in August of that year, the central bank set the "three red lines" to set the growth threshold of interest-bearing liabilities of real estate enterprises, and reduced the scale of financing trusts, forcing real estate companies to deleverage and reduce debt.
In recent years, China Jinmao has reduced leverage by accelerating sales, reducing land reserves, and increasing issuance, and transferred assets to "return to blood".