The Zhitong Finance App learned that since the second half of 2021, it has been more than two years since many housing companies have taken risks one after another. Can Xuhui (00884), an insured housing company that is regarded by the market as the most active in helping itself, get through the industry cycle and usher in a reversal of the difficult situation? Xuhui's 2023 financial report released on March 28 gave the answer.

Financial side: Loss narrowing, debt reduction

According to the annual report, in 2023, Xuhui achieved operating income of 71,833 billion yuan, up 51.4% year on year; income from investment property rent and other related services was 1,592 billion yuan, up 28% year on year; net cash from operating activities was positive for 2 consecutive years;

Although Xuhui is still losing money in 2023, net profit attributable to the parent company and net profit from the core parent company decreased losses of about 4,066 billion yuan and 1,269 billion yuan respectively compared to 2022. In particular, compared to net profit attributable to mother in the 2023 semi-annual report, Xuhui only lost about 11 million yuan in the second half of 2023, and the loss margin narrowed significantly.

Kerui's sales list shows that in 2023, Xuhui achieved full-caliber sales of 70 billion yuan, ranking 19th in the industry, and still has good sales fundamentals.

From an asset perspective, Xuhui's total assets at the end of 2023 were 301.1 billion yuan. After 2 years of cumulative impairment exceeding 17.5 billion yuan, the company still has net assets of about 64.6 billion yuan. The total land reserve area is 36.3 million square meters, and the unsold value exceeds 300 billion yuan. Among them, Tier 1 and 2 cities account for about 74%. In addition, Xuhui also has about 46 billion property assets, distributed in core cities such as Beijing and Shanghai. These asset bases all provided favorable support for Xuhui to get through the industry cycle and resume operations.

It is worth mentioning that Xuhui's total interest-bearing debt was 92.281 billion yuan, a pressure drop of 16.169 billion yuan over the same period last year, and the pressure drop ratio reached 15%. This shows that the company is actively improving its balance sheet and achieving a sustainable capital structure by reducing interest-bearing liabilities.

Business side: Strive to ensure the stability of the delivery team

The market is sluggish, and Xuhui has always responded positively. According to Xuhui, about 118,000 new homes will be delivered throughout 2023, the highest number of deliveries in the year since its establishment. This delivery volume ranked in the TOP10 in Yihan's 2023 housing enterprise delivery list.

The core of “guaranteed delivery” lies in the fulfillment of delivery quality and market recognition. In 2023, Xuhui won Kerui's “Top 8 Real Estate Development Enterprise Delivery Capabilities”; Xuhui's two Xuhui Transparent Factories, Changchun Xuhui Ideal City and Shenyang Xuhui and Jingchenfu, won the “10th Guangsha Award”; Beijing Park City and Xiamen Xuhui Boyue Wuyuan Bay won the “2023 Top Ten Delivery Projects”.

In terms of the pursuit of guaranteed delivery and delivery quality, it can also be seen that Xuhui's local teams still maintain a complete structure, and the hearts of the people are still there and the team is not scattered. According to its official Weiwei disclosure, Xuhui's team accounts for 1/3 of the employees aged 5 years or more. The average management age is about 10 years, and the turnover rate of employees with excellent performance is less than 10%. This stable team base is the foundation for the company to maintain orderly operations, “survive” and “stand up” in a severe market environment.

Debt side: dealing with gradual settlement in an orderly manner

However, overseas debt restructuring is one of the major challenges Xuhui is currently facing. However, according to the Zhitong Finance App, Xuhui has made some progress in debt restructuring. The proposed restructuring framework of “short-term debt reduction, medium-term stock transfer, and long-term capital protection and interest rate reduction” has reached a directional consensus with creditors, with a target debt reduction of about 3.3 billion to 4 billion US dollars. After completing the overseas debt restructuring, Xuhui's debt pressure will be significantly reduced and “go to battle lightly.”

In particular, it is worth mentioning that after Xuhui proposed a new version of the overseas debt restructuring plan in January of this year, he also held a communication meeting with some overseas syndicate creditors, and at the meeting, Xuhui proposed a RMB repayment plan for Chinese bank group loans for the first time. According to investors attending the conference, a number of major Chinese companies participated, and this innovative initiative should help speed up the implementation of their restructuring plan.

In terms of domestic debt, Xuhui completed 2 consecutive domestic debt rollovers totaling 2,448 billion yuan this month, all for a period of 3 years. Throughout 2023, Xuhui completed a total of 4 domestic debt rollovers totaling 7.18 billion yuan.

On March 4, Xuhui Holdings returned to Hong Kong Stock Connect. This also means that the southward capital investment channel has been reopened, creating a more favorable environment for it to promote the “debt-for-equity” restructuring plan.

The capital market also gave positive feedback. According to Wind data, as of March 27, since Xuhui returned to Hong Kong Stock Connect, the net inflow through the Hong Kong Stock Connect channel reached 457 million shares, and Hong Kong Stock Connect's holdings already account for 22.6% of the total share capital. Meanwhile, the average daily turnover after opening reached HK$58.64 million, five times the average daily turnover of HK$10.22 million from January 1 to March 3, 2024.

As Lin Zhong, chairman of the board of directors of Xuhui Holdings, stated in the financial report: 2024 is the hardest year for Xuhui to “climb snowy mountains and cross the grass”, the year with the greatest delivery pressure, a key year for transformation and breakthroughs, and a year for seeing direction and hope.