① In 2022 and 2023, Rongsheng Development achieved revenue of 31,892 billion yuan and 58.960 billion yuan respectively. In 2023, the net cash flow from Rongsheng Development's operating activities was -1,483 billion yuan, a year-on-year decrease of 165.84%. ② At the end of 2023, the company's monetary fund balance was 5.231 billion yuan, and the balance of interest-bearing debt was 41,583 billion yuan.
Financial Services Association, May 16 (Editor Yang Bin) Today, Rongsheng Development (002146.SZ) received an inquiry letter on the Shenzhen Stock Exchange's annual report. In the 2023 annual report, Rongsheng's high growth in development revenue and negative operating cash flow attracted the attention of the Shenzhen Stock Exchange. Since the monetary fund balance at the end of the period was far lower than the balance of interest-bearing debt, the Shenzhen Stock Exchange requested Rongsheng Development Analysis to explain the company's solvency. Currently, Rongsheng Development has a total of 4 outstanding domestic bonds, totaling 3,852 billion yuan. Two other foreign bonds of US$730 million have been extended until 2028.
According to the annual report, in 2022 and 2023, Rongsheng Development achieved operating income of 31,892 billion yuan and 58.960 billion yuan respectively, and achieved net profit attributable to shareholders of the parent company - 16.307 billion yuan and 385 million yuan, respectively. Among them, revenue from the real estate business was 56.339 billion yuan, a year-on-year change of 95.09%; at the same time, the gross profit margin of the real estate business was 17.27%, an increase of 15.04 percentage points over the previous year.
The Shenzhen Stock Exchange asked Rongsheng Development to explain the reasons why the trend of changes in operating income and net profit is inconsistent. For the real estate business, the company is required to confirm whether the revenue is true, accurate, and complete, and analyze the reasons and rationality of changes in revenue and gross margin that are very different from comparable companies in the same industry.
Furthermore, in 2023, the net cash flow from Rongsheng Development's operating activities was -1,483 billion yuan, a year-on-year decrease of 165.84%. By the end of 2023, the company's monetary fund balance was 5.231 billion yuan, down 43.17% from the beginning of the period. The total balance of interest-bearing liabilities (including short-term loans, notes payable, non-current liabilities due within one year, long-term loans and payable bonds) was $41,583 billion, of which the amount of overdue notes was $2,766 billion. At the end of 2023, the company's balance ratio reached 87.19%, the quick ratio was 0.32, and the cash interest guarantee ratio was -0.41.
Figure: Cash flow from Rongsheng Development's operating activities turned negative and deviated from the trend of revenue changes
(Source: Choice data, compiled by the Financial Federation)
The Shenzhen Stock Exchange requested Rongsheng Development to explain the reason for the sharp decline in net cash flow from operating activities, and whether it matches the trend of changes in revenue and net profit. Since the monetary fund balance at the end of the period was far lower than the balance of interest-bearing debt, the Shenzhen Stock Exchange requested Rongsheng Development Analysis to explain the company's short-term and long-term solvency, whether there are liquidity risks, and even whether there is significant uncertainty about the company's ability to continue operating.
Currently, Rongsheng Development has a total of 4 surviving domestic bonds, totaling 3,852 billion yuan, all of which will expire within one year. Among them, “20 Rongsheng Real Estate MTN001” first defaulted on interest in January 2023, and just last month, “20 Rongsheng Real Estate MTN001” and “20 Rongsheng Real Estate MTN002” breached again. According to Rongsheng Development, the company's liquidity is being phased out, and at the same time, in order to fully guarantee delivery, protect the interests of buyers, and fulfill social responsibilities, the funds that can be used to pay the principal and interest of bonds are extremely limited.
The cumulative default amount for the above two bonds was $121 million. In addition to bonds, the amount of overdue interest-bearing debt of Rongsheng Development at the end of 2023 was $3,627 billion.
In terms of foreign debt, Rongsheng Development rolled out two US dollar notes totaling US$730 million in September last year until 2028. The secondary market price of US dollar notes is less than 2 US dollars, and the daily fluctuation is large.
Figure: Rongsheng Development maintains US dollar bonds
(Source: Enterprise Warning Pass, compiled by the Financial Association)
The Shenzhen Stock Exchange is still concerned about Rongsheng Development's foreign debt situation and requested clarification on the impact of the previous default on the company's business conditions, financing situation, and other debts, as well as the latest developments and proposed measures to be taken in dealing with related debt defaults.
In addition to the above matters, subjects such as inventory, investment real estate, accounts receivable, and transactional financial assets in Rongsheng Development's 2023 annual report were all questioned by the Shenzhen Stock Exchange. The company is required to submit the relevant explanatory materials to the Shenzhen Stock Exchange and disclose them to the public by May 30, 2024.
Today, Rongsheng Development's A-shares rose or stopped, closing at 1.84 yuan. Previously, Rongsheng Development's A-shares had been hovering above the 1 yuan face value line for many days.