20220330-招银国际-CARINC__22_will_be_money_good._But_downgrade_CARINC__24_to_Hold_3页_413kb

CMBI Credit Commentary Summary

Core Content Overview

This document provides a credit commentary on CARINC, focusing on its financial performance in 2021, its repayment strategy for 2022, and the outlook for its 2024 notes. The analysis is conducted by CMBI Fixed Income, with the key conclusion being the downgrade of CARINC '24 to Hold due to operating challenges and financial constraints.

Main Points and Key Information

1. 2021 Financial Performance

• Total Revenue: Declined by 10% year-over-year (yoy) to RMB 5,539 million.
• EBITDA: Decreased by 1% yoy to RMB 1,818 million.
• Segment Analysis:
  • Car Rental Revenue: Remained unchanged.
  • Utilization Rate: Increased to 68.1% (+14ppt).
  • Average Daily Rental Rate (ADRR): Unchanged at RMB 181.
  • RevPAC: Improved to RMB 123 due to higher utilization.
• Liquidity Position:
  • Total Debt: RMB 4,941 million.
  • Cash: RMB 1,601 million.
  • Debt/EBITDA Ratio: Reduced to 2.7x from 3.6x in 2020.

2. 2022 Repayment Strategy

• CARINC plans to repay its USD 179.35 million notes due in May 2022 using internal resources.
• Post-repayment, cash reserves are expected to drop to around RMB 500 million to support daily operations.
• Bank Borrowing: Reduced from RMB 871 million (Dec 2020) to RMB 446 million (Dec 2021).
• Financial Flexibility: Concerns over lower cash reserves and slow resumption of banking relationships may limit the company’s ability to refinance.

3. Outlook for CARINC '24 Notes

• Downgrade to Hold: CARINC '24 (YTM ~15.7%, 90 mid) is downgraded from a previous rating due to operating challenges.
• Reasons for Downgrade:
  • Covid Resurgence: Expected to negatively impact the company’s performance in 1H22.
  • Borgward Car Disposal: CARINC aims to sell 37,000 units (37% of its fleet) of Borgward cars.
  • Definitive Agreement: The company has entered into an agreement with a reputable third party to facilitate the disposal of used Borgward vehicles.
• Refinancing Dependency: The company remains reliant on the offshore bond market for refinancing its 2024 notes.

Key Financial Structure as of Dec 2021

Disclaimer and Legal Information

• Author Certification: The author certifies that the views expressed reflect their personal opinions, and their compensation is not tied to the views in the report.
• Trading Restrictions: The author has not traded in the stocks covered in the report within 30 days prior to issuance, and will not do so within 3 business days after issuance.
• Investment Risks:
  • The report is not investment advice.
  • Past performance does not guarantee future results.
  • Investors are encouraged to consult financial advisors.
• Distribution Restrictions:
  • The report is intended for specific recipients.
  • Not for public distribution.
  • No reproduction or redistribution without consent.

Contact Information

• Polly Ng 吴宝玲: (852) 3657 6234 | pollyng@cmbi.com.hk
• Glenn Ko, CFA 高志和: (852) 3657 6235 | glennko@cmbi.com.hk
• James Wen 温展俊: (852) 3757 6291 | jameswen@cmbi.com.hk
• CMBI Fixed Income: fis@cmbi.com.hk
• CMB International Securities Limited: Tel: 852 3761 8867 / 852 3657 6291

Regulatory Information

• CMBIS: A subsidiary of CMB International Capital Corporation Limited, which is a subsidiary of China Merchants Bank.
• UK Recipients: Only provided to individuals falling under Article 19(5) or Article 49(2)(a) to (d) of the Financial Services and Markets Act 2000.
• US Recipients: Only for major US institutional investors. Not for public distribution.
• Singapore Recipients: Distributed by CMBI (Singapore) Pte. Limited (CMBISG), an Exempt Financial Adviser regulated by the Monetary Authority of Singapore. Legal responsibility is limited to Accredited Investors, Expert Investors, and Institutional Investors.

Conclusion

CARINC faced challenges in 2021 due to lower used car sales, but managed to maintain car rental revenue through increased utilization. Despite repayment plans for 2022, the company's financial flexibility is constrained by reduced cash reserves and limited access to bank financing. The downgrade to Hold for CARINC '24 reflects concerns over operating performance and the impact of the Borgward car disposal. Investors are advised to seek professional advice and exercise caution due to the risks involved.