20220504-招银国际-GRNLGR–Prefer_short-end_3页_421kb

CMBI Credit Commentary Summary - GRNLGR

Core Content

This document provides a credit commentary on Greenland Group (GRNLGR), focusing on its financial performance, debt reduction strategies, and investment recommendations. The analysis is based on the company's financial data and market conditions, particularly in the context of ongoing challenges in China's real estate sector.

Key Financial Performance Highlights

• Contract Sales Decline: Contract sales for Greenland fell by -56% year-over-year in the period Jan–Apr 2022, indicating a significant downturn in its business performance.
• Debt Reduction:
  • Total debt decreased by RMB 80bn in FY2021 to RMB 235bn.
  • In 1Q2022, total debt further reduced by RMB 10.5bn to RMB 224.7bn.
  • Net debt dropped by RMB 60bn to RMB 152bn by FYE2021, and slightly increased to RMB 158bn by Mar 2022.
• Cash Position:
  • Unrestricted cash balance fell from RMB 86bn (FYE 2020) to RMB 61.6bn (FYE 2021), and further to RMB 49bn by Mar 2022.
  • The unrestricted cash to short-term debt ratio worsened to 0.53x by Mar 2022 and 0.59x by FYE2021, compared to 0.8x at FYE2020.
• Liquidity and Leverage:
  • The company's net gearing ratio improved to 93% by FYE2021 from 137% at FYE2020.
  • Adjusted liabilities-to-assets ratio marginally improved to 83.7% in FYE2021 from 84.1% in FYE2020.

Main Views and Recommendations

• Ongoing Challenges: Greenland's contract sales have been severely impacted by ongoing lockdowns in China, which have hindered its operations and revenue generation.
• Government Support: There is an expectation of liquidity support from the Shanghai government, similar to the RMB 3bn equity injection in Dec 2021, which may help alleviate its financial pressures.
• Investment Preference: The report prefers short-end bonds of Greenland, specifically:
  • GRNLGR 7.974 08/22 at 89
  • GRNLGR 5.75 09/22 at 86

Key Information

• Debt Reduction Mechanism: Greenland has been using both operating cash flow and cash on hand to reduce its debt. The operating cash flow in 2021 was RMB 62bn, with RMB 40bn from working capital changes.
• Payables Trends:
  • Account payables increased by RMB 82bn to RMB 384bn in FY2021.
  • Payables days rose to 292 from 283 in 2020, suggesting a slower collection process.
• Liquidity Concerns: Despite debt reduction, unrestricted cash levels have been declining, which may raise concerns about liquidity in the short term.

Disclaimer and Risk Information

• The report is not investment advice and should be used for informational purposes only.
• Risks are inherent in any securities transaction, and past performance does not guarantee future results.
• The report is intended for specific investors, including major US institutional investors, and not for general public.
• Legal and regulatory responsibilities vary by jurisdiction, and the report is subject to restrictions in the UK, US, and Singapore.

Contact Information

• Glenn Ko, CFA (高志和):
  Tel: (852) 3657 6235
  Email: glennko@cmbi.com.hk

• Polly Ng (吴宝玲):
  Tel: (852) 3657 6234
  Email: pollyng@cmbi.com.hk

• James Wen (温展俊):
  Tel: (852) 3757 6291
  Email: jameswen@cmbi.com.hk

• CMBI Fixed Income Department:
  Tel: (852) 3761 8867 / (852) 3657 6291
  Email: fis@cmbi.com.hk

• CMB International Securities Limited (CMBIS):
  A wholly owned subsidiary of CMB International Capital Corporation Limited, which is a subsidiary of China Merchants Bank.