20210712-招银国际-First_take_from_Corporate_Day__Redsun_-_Fairly_valued_3页_421kb

CMBI Credit Commentary - Redsun Summary

Core Content Overview

This document is a credit commentary from CMBI Fixed Income Department on Redsun, focusing on its financial performance, market positioning, and strategic initiatives in the first half of 2021. The analysis highlights the company's operational stability, land investment strategy, and regulatory compliance under the "3-red-line" policy.

Main Points

1. Valuation Assessment

• Redsun's bonds (22s to 25s) are considered fairly valued.
• The 24s and 25s bonds have decent yield pickup over the 23s, exceeding 200bps.
• The company is considering repurchasing bonds using offshore cash reserves.
• In the past two months, the 24s and 25s bonds have slid by 5-6 points, while the 22s and 23s have been more resilient, falling by 1-2 points.

2. Operational Performance in 1H21

• Redsun reported pre-sales of RMB49.1bn, representing a +55% yoy increase and 49% of the target completed.
• The attributable ratio remained at 50%, consistent with 2020.
• Cash collection ratio was similar to 2020, at ~88%.
• The company attributes its strong cash collection to geographic diversification (majority in Jiangsu, Zhejiang, and GBA) and efficient mortgage approval processes (average of ~1.5 months vs. 2-3 months for peers).

3. Land Investment Strategy

• Redsun invested RMB10bn in 20 land parcels with a GFA of 1mm sqm in 1H21, covering 39% of the full year budget.
• This investment translates into RMB50bn saleable resources.
• The attributable ratio of newly added resources is 45-50%, with 40% expected to be consolidated.
• The company plans to accelerate land investment in 2H21 to maintain its operational size.
• 9 out of 10 land parcels were acquired through primary land auctions, while 1 was from M&A.
• The unsold land bank as of 2020 was RMB180bn, which covers only 1.8x of the 2021 target pre-sales.

4. Financial and Regulatory Outlook

• Redsun expects to stay in the green camp under the "3-red-line" regulation in its interim results.
• It aims for RMB13bn in revenue (+35% yoy) and a GPM of 20%-22% (down from 22% in 2020).
• The debt-to-equity ratio (MI as % of total equity) increased from 23% to 45% in 2020 due to higher revenue recognition from coordinated projects.
• The company is expected to maintain ~5% debt growth and similar cash levels to 2020.
• CMBI will monitor the MI as % of total equity and external guarantees in the interim results.

Key Information

• Company Name: Redsun
• Contact Details:
  • Polly Ng: (852) 3657 6234 / pollyng@cmbi.com.hk
  • Wilson Lu: (852) 3761 8918 / wilsonlu@cmbi.com.hk
  • James Wen: (852) 3757 6291 / jameswen@cmbi.com.hk
• Department: CMBI Fixed Income Department
• Disclaimer:
  • The report is not investment advice.
  • Risks are involved in trading securities.
  • Past performance does not guarantee future results.
  • Conflicts of interest may exist due to potential investment banking relationships.
  • The report is intended for specific recipients in different regions (UK, US, Singapore).

Conclusion

Redsun has demonstrated operational resilience and effective cash management in 1H21. With a strong pre-sales performance and strategic land investment, the company is well-positioned to maintain its market standing. CMBI believes its bonds are fairly valued, and the company is likely to accelerate land acquisition in the second half of 2021 to support its operations. The firm remains cautious about maintaining reasonable profitability and regulatory compliance under the "3-red-line" policy.