20250908-招银国际-LNGFOR_Passed_through_the_repayment_hump_4页_492kb

CMBI Credit Commentary Summary

Core Content

This credit commentary from CMBI provides an analysis of Longfor's (LNGFOR) financial and operational performance, focusing on its debt management, cash flow, and the impact of the challenging property development environment. The report concludes with a "Maintain Buy" recommendation, highlighting the company's resilience and strong credit profile.

Main Points

1. Debt Management and Credit Profile

• Longfor has successfully navigated the repayment hump in FY25 and continues to reduce net debt.
• Positive free cash flow (FCF) has supported debt reduction despite a difficult operating environment.
• Key credit ratios have improved, with net debt decreasing to RMB140.4bn as of Jun'25.
• The company is expected to further reduce debt through repurchases of USD bonds and partial repayments of syndicated loans.

2. Operating Performance

• Revenue: Increased by 25.4% in 1H25, driven by higher ASP and GFA in property developments and growth in non-property sales.
• Gross Profit: Declined by 23.0% to RMB7.4bn, primarily due to a sharp drop in property sales gross margin to 0.2%.
• Core Attributable Profit: Fell by 70.9% to RMB1.38bn, reflecting the margin pressure in property developments.
• Unrecognized Sales: As of Jun'25, amounted to RMB105.9bn, indicating ongoing challenges in property sales.

3. Non-Property Sales Contribution

• Non-property segments, including rental and property management, have become a significant source of gross profit, contributing over 95% in 1H25.
• Gross profit from non-property segments increased by 2.6% to RMB7.3bn, with a widened gross margin to 55.2%.
• Occupancy rates for investment properties and rental housing remained stable at 97% and 95.6%, respectively.

4. Debt Maturity Profile

• Longfor extended its average debt tenor to 11.0 years from 10.3 years in 1H25.
• Average funding cost decreased to 3.6% from 4.0%, due to increased use of operating loans secured against investment properties.
• Operating loans rose to RMB93.0bn in Jun'25 from RMB77.3bn in Dec'24, with headroom for additional loans estimated at over RMB80bn.

5. Future Outlook

• The company plans to open 10 malls in 2025 and 30 in 2026, which will support recurring cash flow and gross margin.
• CMBI expects Longfor to maintain a strong financial flexibility for refinancing over the next 2-3 years, with the next USD bond maturity in Apr'27.

Key Information

• Bond Profiles (Table 1):

  • LNGFOR 3 3/8 04/13/27: O/S USD250m, YTM 7.28%
  • LNGFOR 4 1/2 01/16/28: O/S USD500m, YTM 7.73%
  • LNGFOR 3.95 09/16/29: O/S USD850m, YTM 8.29%
  • LNGFOR 3.85 01/13/32: O/S USD400m, YTM 8.51%

• Financial Position (Table 3):

  • Net debt reduced to RMB140.4bn in Jun'25.
  • Net gearing decreased to 57.4%, indicating improved leverage.
  • Cash/ST debt ratio remained stable at 1.6x.
  • Adjusted liabilities/assets ratio improved to 56.1%.

Conclusion

CMBI maintains a "Buy" recommendation on LNGFORs, citing the company's disciplined debt management, strong cash flow generation, and growing contribution from non-property segments. The report emphasizes that Longfor is a resilient player in the sector, with a favorable credit profile and strong financial flexibility for the next few years.

Authors

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

• Cyrena Ng, CPA
  Tel: (852) 3900 0801
  Email: cyrenang@cmbi.com.hk

• Yujing Zhang
  Tel: (852) 3900 0830
  Email: zhangyujing@cmbi.com.hk

Important Disclosures

• The report is not investment advice and should not be relied upon for making investment decisions.
• CMBIGM may have conflicts of interest and is not liable for any losses resulting from reliance on the report.
• The report is intended for specific investors and may not be distributed to others without prior consent.
• Distribution is subject to legal restrictions in the UK, US, and Singapore.