S&P lowers Longfors

S&P said it lowered its ratings on Longfor Group Holdings Ltd. to BB+ from BBB- and its senior unsecured notes to BB from BB+.

“Longfor's contracted sales will likely stay weak in 2024 due to a prolonged industry downturn. We forecast the company's total contracted sales will decline by 22% in 2024 to Chinese renminbi (RMB) RMB 136 billion. This estimate is based on a sell-through of 56% (same as 2023) of estimated saleable resources of RMB 240 billion at the end of 2023. We also assume the company will not add additional resources for the year,” S&P said in a press release.

Longfor's contracted sales plummeted 53% year on year in the first quarter of 2024.

“In our view, Longfor's recognized gross profit margin will stay suppressed at 10%-11% over the next two years, compared with 11% in 2023 and 18% in 2022. At the same time, we forecast overall adjusted EBITDA margin will improve to 18%-20% in 2024-2025 from 17% in 2023 due to increased contribution from the higher-margin rental and property services business. We also forecast Longfor's revenue will decline by 13% in 2024 and 3% in 2025 driven by a drop in property development revenue of 18% in 2024 and 9% in 2025,” S&P said.

The outlook is negative.

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