LONGFOR GROUP(HK:00960) YOUNG财经 漾财经·2025-03-13 06:00Core Viewpoint - The article discusses the recent credit rating downgrades of Longfor Group by S&P and Fitch, highlighting the challenges faced by the company in the declining real estate market and its efforts to diversify and reduce leverage [2][4][14]. Group 1: Financial Performance - Longfor Group issued a profit warning on March 7, 2024, forecasting a core profit decline of approximately 35% to 40% for 2024, estimating a range of CNY 68.1 billion to CNY 73.8 billion, down from CNY 113.5 billion in 2023 [2]. - The company's revenue for the first half of 2024 was CNY 468.6 billion, a 24.5% decrease year-on-year, marking the lowest half-year revenue in five years [8]. - The real estate development business, which is the core revenue source, generated CNY 337.6 billion in the first half of 2024, down 32.31% from the previous year [8]. Group 2: Credit Rating Downgrades - S&P downgraded Longfor's long-term issuer credit rating from "BB+" to "BB" on March 5, 2024, citing concerns over the company's future debt repayment ability and operational status [2][3]. - Fitch followed suit in October 2024, lowering Longfor's long-term foreign currency issuer default rating (IDR) from "BB+" to "BB," with a negative outlook due to weaker-than-expected sales and cash flow [4][14]. - S&P expects Longfor's debt-to-EBITDA ratio to remain high at around 8 times from 2024 to 2025, up from 6.4 times at the end of 2023 [3][6]. Group 3: Sales and Market Conditions - Longfor's confirmed real estate development gross margin is projected to be constrained at 5%-6% for 2024, down from 11% in 2023 and 18% in 2022 [3][5]. - The total contract sales amount for Longfor was CNY 1,011.2 billion by the end of 2024, a 42% decrease from CNY 1,734.9 billion at the end of 2023 [7]. - In January 2025, Longfor's monthly contract sales were CNY 44.6 billion, a 36% decline compared to January 2024 [7]. Group 4: Business Diversification and Future Outlook - Longfor has been diversifying its business, with non-development revenue sources such as operational and service businesses contributing CNY 131 billion, although this is less than 30% of total revenue [12]. - The company aims to enhance the contribution of non-development business income and profit, focusing on high-quality development and maintaining positive operating cash flow [12][14]. - Despite the challenges, Longfor's existing cash reserves and financing channels through commercial property loans are expected to meet its debt obligations in the next 12 months [13].