Jinwu Financial News | According to Oriental Securities Research, Xuhui Holding Group (00884) has faced severe domestic and foreign debt repayment pressure since Q3 2022, and announced the suspension of payment of principal and interest on all foreign bonds in early November '22. In terms of domestic debt, the 7.18 billion yuan domestic debt due in 2023 has all been rolled over. As of the end of June 2023, the company's foreign debt (excluding accrued interest) was approximately US$7 billion. The company aims to deleverage its comprehensive balance sheet of about US$33-40 billion through elements such as principal reduction and share conversion in the options. As of June 30, 2023, the fair value of the company's investment properties was approximately RMB 45.625 billion. The gradual sale of some of its investment properties and overseas assets is expected to increase overall working capital by about $120-14 billion, and the total cumulative cash flow from repayable overseas debts is estimated to be around RMB 30-35 billion.
The bank continued that in 2023, the country's commercial housing sales fell 6.5% year on year. Meanwhile, the company achieved cumulative contract sales of about 70 billion yuan throughout the year, down 43.6% from last year. The company's sales situation is not as good as that of the industry. The main reason is that buyers are concerned about the company's debt problems, and difficulties in selling new homes continue to make the liquidity problem of housing enterprises difficult to solve. After the company's debt restructuring is implemented, overseas debt repayment pressure will be effectively relieved, which is conducive to a recovery in future sales.
According to the latest operating conditions in the company's mid-year report, the bank adjusted its forecast for sales growth rate, gross margin and expense ratio. The adjusted net assets per share for 23-25 were 1.63, 1.22, and 0.82 yuan (the original forecast was 3.40 and 3.80 yuan for 23-24). Comparable to the company's average PB in 2024, the bank was downgraded to a neutral rating, and the target price was lowered to HK$0.34 (HK$1 = 0.907 yuan).