20230301-招银国际-Yanlord__Resilient_FY22_results_and_business_model_maintain_Buy_3页_416kb

CMBI Credit Commentary Summary

Core Content

This document provides a credit commentary on Yanlord's FY22 performance and outlook, highlighting its resilience in a challenging market environment. It also outlines the investment ratings and analysis for its various bonds, including YLLGSP'24 and YLLGSP'26, while turning Neutral on YLLGSP'23 due to its short maturity and pricing above par. The report includes financial metrics, sales targets, and refinancing plans, along with important disclosures regarding the risks and legal responsibilities associated with the information provided.

Key Financial Performance

• FY22 Revenue: Declined by 17.6% to RMB28.7bn.
• PBT (Profit Before Tax): Declined by 29.8% to RMB5.4bn.
• Net Core Profit: RMB2.1bn, down 14% yoy, largely in line with revenue decline.
• Gross Margin: Increased to 27.0% from 25.6%, but lower than 35.6% in 1H22.
• Net Debt: Increased by 16.4% to RMB25.2bn.
• Net Gearing Ratio: 55.6% as of Dec'22, expected to moderately decline by FYE23.
• Cash on Hand: RMB20.7bn as of Dec'22, with RMB8.5bn in escrow and cRMB2.5bn at parent company level.

Bond Analysis

• YLLGSP'24 and '26: Maintain Buy rating due to their low-beta nature and decent carry.
• YLLGSP'23: Turned Neutral as bonds with less than 2 months to maturity are already offered above par.
• Outstanding Amount: Estimated at cUSD330mn after USD20mn buy-back.

Sales Targets and Outlook

• FY22 Contract Sales: RMB68.1bn, up 14.3%, despite falling short of the RMB75bn target.
• FY23 Saleable Resources: RMB80bn, with a contract sales target of RMB45-50bn.
• Sell-Through Rate: Expected to be 56-63% for FY23, compared to c57% in FY22.
• Sales Target Evaluation: Considered conservative, given the historical sell-through rate, China's economic recovery, and potential policy relaxation in T1/2 cities.

Business Strategy and Model

• Yanlord is focusing on T1/2 cities in YRD and GBA with strong economic fundamentals and positive population inflow.
• The company is gradually transitioning to a more asset-light model, but is expected to be more active in land acquisitions in FY23.
• The resilient operating performance is attributed to its prudent management and strategic focus.

Investment Considerations

• Low-Beta and Carry Plays: YLLGSP'24 and '26 are viewed as low-risk and attractive for yield.
• Funding Access: The company is considered to have normalizing funding access.
• Refinancing Plan: In place to ensure stability, with sufficient cash to cover bond repayments.

Important Disclosures

• Risks: All investments carry risk, and past performance does not guarantee future results.
• Disclaimer: The report is not investment advice and should be used for informational purposes only.
• Legal Responsibilities: CMBIGM is not liable for any losses incurred from relying on the report.
• Distribution Restrictions:
  • UK: Only for persons under Article 19(5) or Article 49(2) of the Financial Promotion Order 2005.
  • US: Intended solely for "major US institutional investors" and not for general distribution.
  • Singapore: Distributed by CMBISG, an Exempt Financial Adviser, and only to certain categories of investors.

Author Certification

• The author certifies that all views in the report reflect personal opinions and that compensation is not tied to the report's content.
• No trading in the stock covered in the report was conducted within 30 days prior to the report's issue.
• The author does not serve as an officer of any Hong Kong-listed company covered in the report and has no financial interests in them.