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Zhenro Properties Announces Annual Results 2020

Update: March, 26/2021 - 13:17

Focus on High-Quality Growth Core Profit up by 18.9%

Deep Penetration of First- and Second-Tier Regions

Focus on Enhancing Management Efficiency

Maintain Financial Soundness

Substantial Decline of Average Cost of Borrowings

Financial Highlights:

RMB mn

For the year ended 31 December

Changes

2020

2019

Revenue

36,126

32,558

+11.0%

Profit for the Period

3,559

3,094

+15.0%

Core profit1

3,304

2,779

+18.9%

Proposed final dividend (HKD)

0.15

0.10

+50.0%

As at 31 December

Changes

Cash on hand

42,973

35,307

+21.7%

Net debt to total equity ratio

64.7%

75.2%

- 10.5 pts

Short-term debt to total debt ratio

29.1%

34.2%

- 5.1 pts

Cash to short-term debt ratio

2.20x

1.76x

+44.0 pts

Onshore other borrowings to total borrowings ratio

5.9%

20.4%

-14.5 pts

Weighted average cost of borrowings

6.5%

7.5%

-1.0 pts

HONG KONG SAR - Media OutReach - 26 March 2021 - Zhenro Properties Group Limited ("Zhenro Properties" or "the Group"; stock code: 6158), a leading PRC property developer, announced its audited annual results for the year ended 31 December 2020 (the "Year"). Besides, the Company is pleased to announce that Mr. Liu Weiliang has been appointed as vice chairman of the Board and Mr. Li Yang has been appointed as an executive director and executive vice president of the Company. Mr. Liu and Mr. Li have abundant experience in the real estate industry. Both of them are talents cultivated by Zhenro Properties and have held various key positions successively in the Group, and the Company believes their appointments will further enable the Group to achieve a "high-quality growth".

Results

During the Year, the Group achieved a solid growth in results. Its revenue increased by 11.0% year-on-year to RMB36.13 billion. Profit for the Year was RMB3.56 billion, representing a year-on-year increase of 15.0%. Net profit margin was 9.9%. The core profit1 was RMB3.30 billion, representing a year-on-year increase of 18.9%. Core profit margin was 9.1%. The Board recommends the payment of a final dividend of HKD0.15 per share.


Innovative Targeted Marketing in Response to the COVID-19 Pandemic

In the first half of 2020, in response to the impact brought by COVID-19 pandemic, the Group established a "Pofeng Action (破風行動)" team which was responsible for the smooth resumption of construction projects, punctual supply of units and minimization of risks associated with unit delivery, and attained project resumption rate of 100% within 45 days of the shutdowns. In addition, through integrating big data resources and unifying online traffic platform across the country, the Group quickly carried out online-to-offline marketing, including the launch of an online sales app of "Zhenro Home (正榮置家)" and JD Zhenro flagship store to provide a new experience of virtual reality online tour of residential units. The Group also launched a series of innovative and targeted online live streaming marketing activities to draw more attention and sales in the market. During 2020, the Group recorded aggregated contracted sales of RMB141.9 billion, successfully achieving contracted sales target for the Year.

Deep Penetration of First- and Second-Tier Regions with Equal Emphasis on Quality and Equity Interests of Investment

The Group pursues the strategy of "regional penetration" by expanding its market share in the metropolis and their surrounding areas, laying a foundation for the future continuously high-quality development. During 2020, the Group acquired 46 parcels of land with total estimated GFA of approximately 7.14 million sq.m. in 21 cities. Of the Group's newly acquired land bank, 43% and 31% is located respectively in the Yangtze River Delta region and the Western Taiwan Straits region, which are two core areas where the Group has considerable advantages. In terms of the tiers of cities, 77% of the Group's newly acquired land bank is located in first- and second-tier cities with good economic fundamentals. Besides, the overall equity interests in the newly acquired land bank was approximately 70% in 2020. As at 31 December 2021, the Group had a land bank with GFA of about 28.45 million sq.m. in 32 cities in the PRC, 82% of the land bank is located in first- and second-tier cities. The Group's equity interests in the land bank as at 31 December 2021 increased to 58% from 55% as at the end of 2019.

Optimized Financial Structure and Decreased Finance Cost

In 2020, the Group succeeded in raising funds despite the significant fluctuations in the global capital markets. It successfully seized several opportunities for financing, including being the fore-runner to issue senior notes at the beginning of the recovery in the offshore bond market in May 2020 after a heavy shock to the global capital markets. Besides, the Group took a crucial step forward in green finance practice by issuing green senior notes for twice, which received positive response from the markets. In the domestic capital market, the Group continued to deepen cooperation with various financial institutions in both traditional financing and capital markets financing, and meanwhile, continued to reduce its reliance on financing with higher costs and shorter tenor to optimize its debt structure and lower its financing cost.

Benefiting from the optimized debt structure, cash collection and cash flow management, the Group's major financial ratios and credit ratio were further improved. As of 31 December 2020, the Group's net debt-to-total equity ratio decreased substantially by 10.5 percentage points to 64.7%, and its cash-to-short term debt ratio was improved to approximately 2.2 times with the proportion of short-term debts decreasing to 29.1%. The onshore other borrowings to total borrowing ratios fell significantly by 14.5 percentage points to 5.9%. The Group also recorded a decrease in the cost of its newly raised financing in both the domestic and offshore capital markets and optimized the debt structure. As at the end of 2020, the weighted average cost of borrowings substantially decreased to 6.5%.

The Group has been recognized by credit rating agencies for its prudent financial management and overall strength. During the Year, Zhenro Property Holdings Company Limited, a wholly owned subsidiary of the Company, was assigned "AAA" corporate credit rating (which is the highest rating) with a stable outlook by China Chengxin International Credit Rating Co., Ltd. (中誠信國際信用評級有限責任公司) and Dagong Global Credit Rating Co., Ltd. (大公國際資信評估有限公司). Despite the increasingly complicated global situation, Moody's and Fitch Ratings maintained the credit ratings of B1 (stable) and B+ (stable), respectively for the Company.

Improvement and Upgrade of Products, Enhancement of Management Efficiency

The Group continued to strive for improvement and upgrade of products, as well as enhancement of operation effectiveness and efficiency, so as to achieve a sustainable "high-quality growth". During the Year, the Group focused on improving standardization, premiums, and quality of products. Having positioned itself as "Home Upgrade Master", the Group has explored the possibilities of product innovation by taking factors such as natural environment, culture and health into account and is committed to continuously improving and upgrading the properties to suit the various needs of customers in their daily life. The Group launched the "Zhenro Oasis Community Plan (正榮綠洲社區計劃)" for building an ideal and modern community to live in. The plan aimed at comprehensively upgrading the system of intelligent security systems, community facilities and property service standards and strives to enhance customers' living experience, providing green and comfortable property products.

In order to improve management results and efficiency, the Group has adjusted the corporate organizational structure in three aspects to improve the management effectiveness and efficiency. Firstly, the Group integrated and upgraded the functional management center of the headquarters and enhanced the strategic positioning and development planning of each management center; secondly, the Group strengthened the business standardization and refined management; finally, the Group consolidated resources of regional companies, carried out differentiated management according to the development maturity of each regional company and ensured ordered authorization, to improve decision-making efficiency. During the Year, the Group continued to improve the efficiency of project development, including the average period for a project to confirm its positioning after land acquisition has been shortened to less than a month; the average initial sale period of a project was approximately seven months; the average sell-through rate at the initial launch exceeded 70%.

Sound Corporate Governance and Enhancement of ESG Management

The Group's investment value has been well recognized for its prudent corporate image, good operational results and excellent brand value. In the capital markets, the Group has received equity and fixed-income research coverages and positive commentaries by over 20 well-known domestic and overseas investment banks and securities houses. Besides, the Group received a number of awards and honors in 2020, including "Most Progress in IR Award" by Hong Kong Investor Relations Association, "Most Impressive Corporate Issuer 2020" by GlobalCapital China, "Asia's Best CEO (Investor Relations)" and "Best Investor Relations Company (China)" by Corporate Governance Asia, "Certificate for Excellence in Investor Relations" by IR Magazine, "Best Investor Relations (Investment Grade & High Yield)" and "Best Use of Debt (Investment Grade & High Yield)" by Institutional Investor, "Triple A Sustainable Capital Markets Regional Awards 2020 – Corporate Issuer of the Year 2020" and "Triple A Sustainable Capital Markets Regional Awards 2020 – Best Green Bond (Real Estate)" by The Asset.

In terms of green development and environmental protection issues, the Group has put the construction of environmental-friendly green buildings as the core of its internal environmental policies, and has invested capital in supporting product design innovations, aiming at the effective utilization of materials, energy and space, and protecting the environment from the sources. Currently, Zhenro Properties has 10+ projects that obtained 2-star or 3-star green building certificates in PRC. In terms of green financing, in August 2020, Zhenro Properties established the "Zhenro Properties Green Bond Framework", and engaged Sustainalytics, an authoritative independent ESG rating agency, to conduct an independent external review over the framework and obtain its second-party opinion. The Company then issued two rounds of green senior notes in September and November 2020, respectively. The bond issuances received overwhelming responses from the capital markets and attracted the participation from various ESG and green funds. Besides, since the beginning of 2021, the Group has issued two more rounds of green senior notes with an aggregated amount of USD700 million, with the coupons rates of 6.63% and 6.7%, respectively, and tenors of 5 years and 5.5 years, respectively, further lowering the Group's finance cost. During the Year, the Group participated in the ESG ratings or evaluations conducted by four international institutes, of which MSCI upgraded the Company's ESG rating to BB in December 2020. In the long run, the Company believes that the Group's contribution to the environment will enhance the value of shareholders and investors, as well as the Company's brand and reputation. Zhenro Properties on one hand actively fulfills its corporate social responsibilities, while on the other hand continues to enhance information disclosure of relevant topics and ratings.

Prospects

Looking ahead, Mr. Huang Xianzhi, Chairman of the Board said, "The PRC government will continue to focus on the implementation of the policies of 'houses are for living in, not for speculation' and 'stabilizing land prices, property prices and expectations', in order to facilitate the healthy and stable development of the industry. It is expected that there will be limited relaxation of various policies in the property industry in the foreseeable future, and the property industry will go through another round of deleveraging, and the gap among cities and property developers will diverge further. The essential housing demand will surge in cities and their metropolitan circles with strong economic fundamentals and fast-growing population. The property market remains strong in the long-term. The large-scale branded property developers with sound financial positions are expected to further expand their market shares relying on their own products, brands, capital, talents and operational advantages. The Group will seize opportunities for investment and focus on improving both the operational quality and efficiency. All these will enable the Group to achieve a 'high-quality growth'.

Mr. Huang Xianzhi continued, "2021 is the final year of Zhenro Properties' 'New Three-Year Strategy'. To achieve the goal of 'high-quality growth', the Group will continue to enhance its management structure and talent echelon; the Group will continue to enhance its operational and management capabilities by improving the decision-making mechanism and standardization management to achieve management upgrade; the Group will stick to the principle of prudent investment, pay close attention to market changes, put investment at a reasonable and appropriate pace, and focus on first and second-tier cities and their metropolitan circles; the Group will focus on improving the capital efficiency and effectiveness driven by the 'cash flow and profit' management, and further improve its credit ratings, reduce operating expenses and finance costs, and increase profitability".


1 Defined as profit excludes changes in fair values of investment properties and financial assets, exchange gain or loss, impairment loss and the relevant deferred taxes

About Zhenro Properties Group Limited

Zhenro Properties Group Limited is a leading property developer in the PRC with nationwide business presence in six key economic regions. The Group achieved contracted sales of RMB141.9 billion in 2020 and was ranked the top 20 in the Best 200 China Property Developers by Comprehensive Strength in 2020. Upholding its brand position of "Home Upgrade Master", the Group focuses on bringing quality residences to middle class and affluent home upgraders. Zhenro Properties was listed on the Main Board of the Hong Kong Stock Exchange in 2018. It is a constituent stock in the Hang Seng Composite LargeCap/MidCap Index, Hang Seng Large-Mid Cap Value Tilt Index and the MSCI China Index and is included in the list of eligible stocks for southbound trading of the Shenzhen/ Shanghai - Hong Kong Stock Connect.

Zhenro Properties Group Limited

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