On March 28, Fitch, an international credit rating agency, released its latest rating report on Longhu Group (00960), confirming that its issuer and senior unsecured bonds are rated BB+, and that Longhu still maintains the highest credit rating for private housing enterprises in China.

According to Fitch, Longhu's rating is supported by its strong and unobstructed bank financing channels and growing operating income.

According to the performance report just released by Longhu Group, in 2023, Longhu Group continued to reduce its liabilities in a steady and orderly manner. By the end of 2023, Longhu Group's interest-bearing debt balance was 192.65 billion yuan, down 7.4% from the previous year, with bank financing accounting for 77%; the average borrowing cost was 4.24%, keeping the industry low; the debt structure continued to be optimized, and the average loan period was 7.85 years, further lengthening; the net debt ratio was 60.4%, excluding pre-received loans. A series of indicators all maintain high standards within the industry.

Fitch pointed out in the report that Longhu holds large-scale investment properties and can be used for operating property loan financing. In 2023, Longhu increased its financing efforts for operating property loans, with a net increase of 17.4 billion yuan in operating property loans throughout the year. The average financing cost was as low as 3.65%, further extending the loan period with better costs. Furthermore, the remaining loan credit amount of Longhu Bank exceeds 200 billion yuan, the remaining amount of corporate bonds, housing rental special bonds, and medium-term notes reached 40.7 billion yuan, and the remaining amount of overseas loans and US dollar bonds reached 1.28 billion US dollars. During the period of deep adjustment of the industry, Longhu Group continued to take the initiative in financing.

Fitch estimates that with policy support, Longhu has accumulated more than 18 billion yuan in operating property loans since the beginning of the year, of which more than 12 billion yuan is an increase in stock operating property loan replacement, and a net increase of about 20 billion yuan is expected for the whole year. The overall financing space for operating property loans exceeds 100 billion yuan.

Furthermore, for the first time this year, Longhu achieved positive operating cash flow, driving endogenous development. The total operating and service business achieved operating revenue of 24.88 billion yuan, an increase of 5.7% over the previous year, and contributed more than 60% to the net profit of core equity, further strengthening Longhu's “safety cushion”.

Fitch also expressed concern about sales in the real estate industry in the report, believing that industry data showed that although the market rebounded in March, there is still uncertainty about the continued stability of sales.

However, since this year, the real estate industry has continued to welcome favorable policies, and the real estate purchase restriction policies in first-tier cities have already begun to loosen. On March 27, the Beijing Municipal Housing and Construction Commission confirmed that Beijing's “no purchase in Beijing within 3 years of divorce” policy document was abolished, which was viewed by the outside world as a sign of a new wave of relaxation for first-tier cities. Based on this, CITIC Securities predicts that interest rates on mortgage loans will continue to decline, and purchase restriction policies in major cities are expected to be further liberalized, driven by the gradual acceleration of policies.