Chinese Property Developers 2021 Annual Results Review: Survival of the Fittest

A number of Lianhe Ratings Global Limited (“Lianhe Global”)’s rated Chinese property developers announced their 2021 annual results with an average growth of 6.7% and 18.2% (excluding outliers) in contracted sales and revenue, respectively. However, the gross margin squeeze continued in 2021 with a 2.3 percentage points decrease on average in 2021 compared with 2020, due to more price cuts and discounts. As a result, these property developers recorded earnings decline and dividend cut of 29.3% and 40.8% on average (excluding outliers) in 2021, respectively, mainly due to the lower gross margin. These property developers recorded an average year-on-year increase of 2.9% of their total debts in 2021, and recorded an increase of 3.7 percentage points on average in their net gearing ratios, mainly due to the lower cash on hand. These property developers’ average financing cost was lowered by 0.2 percentage point on average in 2021, while all of them were able to pass either 2 or 3 out of the 3 thresholds stated in the “3 Red Lines” rules at end-2021.