Behind the change of Zhongnan Group: debt ratio exceeds 90%, pressure on real estate and construction business
Zhongnan Group’s companies have successively withdrawn from the holding company. Although the company’s operating income and net profit are still good, the debt at the end of June last year exceeded 260 billion and the asset-liability ratio exceeded 90%.
A company owned by Zhongnan Holding Group Co., Ltd. (hereinafter referred to as “Central South Group”) has recently withdrawn from a company with a large shareholding and is taken over by Suzhou local state-owned assets. In December last year, the Beijing News reported that the Central South Department had withdrawn from its two listed companies.
Zhongnan Group is a large private enterprise in Jiangsu, ranking 94th among the top 500 Chinese companies. According to Chen Jinshi, the actual controller of Zhongnan Group, in the past year, Zhongnan Group has continued to promote reform and transformation, integrating from the original “7 + 3” sector into a “4 + 1” new industry pattern.
At present, Zhongnan Group has a good profitability. In the first half of 2019, it realized operating income of 27.937 billion yuan and net profit of 1.672 billion yuan. As of the end of June 2019, total assets were 294.954 billion yuan and total liabilities were 268.759 billion yuan. Zhongnan Construction, a listed company of Zhongnan Group, also performed well. It is estimated that the net profit attributable to shareholders of listed companies will increase by 80% to 110% in 2019, which is mainly due to the increase in the settlement scale of the company’s real estate business.
In a report previously issued by the rating agency, the gross profit margin of Zhongnan Construction, one of the main businesses of Zhongnan Group, has increased, and the gross profit margin of the construction sector has also increased, but the company’s gross profit margin is still at a relatively low level.
Chen Yuhan, the daughter of Chen Jinshi and the current president of Zhongnan Land, also stated in a speech recently that the future must pursue excellent ROIC (return on investment) performance at a reasonable growth rate and debt. One of the core goals of Zhongnan Land in 2020 is before financing In order to hedge against deleveraging pressure, “no money can be found, investment is free.”
Central South Department exits tourism industry company
The business information of Road King Huitong Cultural Tourism Industry Development Co., Ltd. (hereinafter referred to as Road King Huitong) shows that it has undergone various changes on December 26, 2019. The original shareholder Huizhou Zhongnan Jinxin Real Estate Co., Ltd., which previously held 97% of the shares (Hereinafter referred to as “Huizhou Zhongnan Jinxin”) withdrew and added shareholders Suzhou Landscape Industry Development Investment Center (Limited Partnership) and Suzhou Transportation Engineering Group Co., Ltd. In addition, Weiguang Huitong Cultural Tourism Investment Co., Ltd., another shareholder of Road King Huitong, was renamed Weiguang Huitong Cultural Tourism Investment Group Co., Ltd. (hereinafter referred to as “Weiguang Huitong”).
At present, the shareholders of Lujin Huitong are Suzhou Landscape Architecture Industrial Development Investment Center (Limited Partnership), Suzhou Transportation Engineering Group Co., Ltd. and Weiguang Huitong, with 80%, 17% and 3% of the shares respectively.
On the afternoon of January 15, the reporter dialed the number registered in the industrial and commercial information of Lujin Huitong. The voice prompt said that the number was “Zhongnan Land Guangshen Regional Company.” The reporter dialed the corresponding number as prompted and was not connected. Later, the reporter called Zhongnan Group and failed to connect.
Road King Huitong was established in August 2016, and its business scope includes management of tourist attractions. Industry and commerce information shows that the original shareholder of Lujin Huitong Huizhou Zhongnan Jinxin was established in July 2018 with a registered capital of 10 million yuan. There are two shareholders, each of which has a subscribed capital of 85% and a subscribed capital of 15%. % Natural person Li Linghui.
The two new shareholders who take over the shares of Jinan Tongtong, a subsidiary of Zhongnan Department, have the background of local state-owned assets in Suzhou.
The partners of Suzhou Landscape Architecture Industry Development Investment Center (Limited Partnership) are Suzhou Landscape Architecture Investment Development Group Co., Ltd. and Suzhou Agricultural Development Innovation Capital Management Co., Ltd. Suzhou Landscape Architecture Investment Development Group Co., Ltd. is wholly-owned by Suzhou State-owned Assets Supervision and Administration Commission. Suzhou Nongfa Innovation Capital Management Co., Ltd. is a wholly-owned subsidiary of Suzhou Agricultural Development Group Co., Ltd., which is said to provide the only Municipal state-owned enterprise groups that provide comprehensive agricultural services.
As for another new shareholder, Suzhou Transportation Engineering Group Co., Ltd., Suzhou Transportation Investment Co., Ltd., which is wholly-owned by Suzhou State-owned Assets Supervision and Administration Commission, holds 27.62% of its shares, and the remaining 72.38% of the shares are held by the Suzhou Jiaotong Group Workers’ Share Holding Association.
According to industry and commerce information, on September 25, 2019, Weiguang Huitong had pledged some shares of Lujin Huitong to Huizhou Zhongnan Jinxin. At present, the status of the registration information of the equity pledge has been “invalid”.
In addition, it is worth noting that Road King Huitong has been listed on the operating anomaly list twice. The latest time was January 6, 2020. The decision-making authority was the Beijing Haidian District Market Supervision and Administration Administration. The reason for its inclusion in the business anomaly list was “the registered residence or business place could not be contacted.”
In addition to Huizhou Zhongnan Jinxin’s exit from Lujin Huitong, one month ago, Central South also withdrew from its two companies, Fuyang and Huaxiong Song Real Estate Co., Ltd. and Zhiyi (Shanghai) Trading Company.
According to industry and commerce information, the investor change of Fuyang Hehuan Joyson Real Estate Co., Ltd. (hereinafter referred to as “Fuyang Hehua”) on November 14, 2019, the original shareholder Zhongnan Holdings Group (Shanghai) Asset Management Co., Ltd. withdrew, and new shareholders were added. Anhui Lelai Ke Real Estate Co., Ltd.
Zhongnan Holdings Group (Shanghai) Asset Management Co., Ltd. is 75% owned by Zhongnan Group and 25% owned by Jiaxing Qianhuang Investment Partnership (Limited Partnership). The partners of the latter include Lu ADB, the wife of Chen Jinshi, the actual controller of Zhongnan Group, and daughter Chen Yuhan et al. According to the official website of Zhongnan Group, Lu Ya is currently the vice president of Zhongnan Group and executive director (and president) of Zhongnan Education Group. Chen Yuhan is a director of Zhongnan Group and president of Zhongnan Land.
Zhiyi (Shanghai) Trading Co., Ltd. (hereinafter referred to as “Zhiyi Trading”) changed its investors on November 2, 2019. The original shareholders Zhongnan Financial Holdings (Shanghai) Investment Co., Ltd., Lu ADB, Shi Jinhua, Ju Shuhua and Xing Xiaoyan withdrew. The new shareholders are Wang Haiying, Chen Chen and Mu Yijun. The current shareholders are Yu Guojie, Wang Haiying, Chen Chen and Mu Yijun.
Zhongnan Financial Holdings (Shanghai) Investment Co., Ltd. is a wholly-owned subsidiary of Zhongnan Group, and its capital contribution to Zhiyi Business was originally 51%. Except for Zhongnan Financial Holdings (Shanghai) Investment Co., Ltd. and Lu Asian Bank, the exit shareholders of Zhiyi Business include a number of executives in the financial sector of Central South. According to the official website of Zhongnan Group, Shi Jinhua and Ju Shuhua are executive directors and chief executive officers of Zhongnan Finance; Xing Xiaoyan is the head of human resources of Zhongnan Finance.
Debt ratio exceeds 90%, Zhongnan Group’s business changes
From the perspective of performance, Zhongnan Group currently has good profitability. It achieved operating income of 27.937 billion yuan and a net profit of 1.672 billion yuan in the first half of 2019. As of the end of June 2019, total assets were 294.954 billion yuan and total liabilities were 268.759 billion yuan. The converted asset-liability ratio was 91.12%.
In the second half of 2019, Zhongnan Group and its listed company, Zhongnan Construction, frequently associated transactions. Zhongnan Construction is called to promote the development of football town supporting land projects. It plans to acquire a number of assets of Zhongnan Group. Tall buildings sold to Zhongnan Group.
According to the official website of Zhongnan Group, the chairman of the board of directors of the group Chen Jinshi said in the 2020 New Year’s message that the total revenue of the group is expected to reach 300 billion yuan.
Chen Jinshi also said that the reform and transformation of the entire group continued in 2019, and the original “7 + 3” sector was integrated into the new “4 + 1” industry pattern of Zhongnan Land, Zhongnan Construction, Zhongnan Hi-Tech, Zhongnan Industrial Investment and Zhongnan Education. The structure is more reasonable, and management reforms focusing on decentralization and shareholding reform are being continuously advanced.
Regarding the above-mentioned “7 + 3” plate, according to the previous official statement of Zhongnan Group, it refers to the seven major industrial plates of Zhongnan Land, Zhongnan Construction, Zhongnan Civil Engineering, Zhongnan Capital, Zhongnan Finance, Zhongnan Construction Investment, Zhongnan Industry and Zhongnan Group. High-tech, Central South Education, Central South Garden three business units.
As for the “4 + 1” business layout, a push from Zhongnan Group last December showed that the group has formed a real estate group (Zhongnan Land), a construction group, a high-tech group (Zhongnan High-tech), an investment group (Zhongnan Industrial Investment) and an education group (Central South Education); of which, the construction group will be divided into 3 major business units, 2 professional companies and 5 characteristic companies. Civil engineering, construction investment, and gardens that were originally separate sections were merged into the construction group.
Proactive change or related to real estate industry funding pressure
At present, the business of Zhongnan Group focuses on real estate development and construction. The reason for the business sector adjustment may be related to the situation of the real estate and construction industry.
Lianhe Credit Rating Co., Ltd. (hereinafter referred to as “Lianhe Credit”) made a credit rating report on the issue of corporate bonds issued by Zhongnan Construction in November last year. After the real estate regulation and control in October 2016, the financing environment became tighter again, and housing enterprises faced greater pressure on capital.
The above-mentioned rating report shows that with the restrictions on financing of real estate companies by the policies, the ability of real estate companies to make blood is increasingly important. In 2018, the central bank has lowered its allowance four times, released some liquidity, loosened its monetary policy structure, and improved the capital of housing enterprises. However, financing is still tight and funding pressure is still high.
At the same time, the real estate industry is showing a trend of increasing concentration, and large real estate companies with capital, brand and resource advantages have an advantage in the competition.
In the report, Credit Union pointed out that, overall, Zhongnan Construction’s operating income showed a volatile growth trend, and the real estate gross profit margin level increased. As the company raised the threshold for construction business acceptance, the gross profit margin of the construction sector also increased; but it was still at a relatively low level. .
In the 2019 annual results pre-announcement announcement recently announced, Zhongnan Construction estimates that the net profit attributable to shareholders of listed companies in 2019 will be 3.947 billion yuan to 4.605 billion yuan, an 80% to 110% increase over the same period in 2018. Zhongnan Construction said that the main reason for the expected substantial increase in net profit in 2019 is the increase in the settlement scale of the company’s real estate business.
Chen Yuhan, the daughter of Chen Jinshi and president of Zhongnan Land, stated at the 2020 annual meeting of Zhongnan Land that the situation no longer allows the industry to maintain a high growth rate. The tightening of normalized financing has also reduced our debt capacity. The rate of growth and the extensive and extensive growth of high debt are becoming more and more difficult. “We can only look inward for business certainty. The main expression of this certainty is ROIC-return on invested capital, which is based on your The return on all principal and borrowing calculations … In the future, we must pursue excellent ROIC performance at reasonable growth rates and liabilities. “
According to Chen Yuhan’s speech, Zhongnan Land has two major shortcomings in profitability and product capacity. In terms of profitability, gross profit was significantly lower due to historical burden erosion, high land prices and costs, product errors or insufficient premium capabilities, and inadequate scale advantages led to significantly higher costs.
Chen Yuhan proposed that one of the core goals of Zhongnan Land in 2020 is to provide financing in advance. It refers to “integration of investment and integration, and the use of ships to go to sea. , Investment free talk. “
Beijing News reporter Zhu Yiyi Editor Zhao Ze Proofreading Fan Jinchun