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Evergrande again introduces 60 billion strategic investments to accelerate the transformation, the debt rate drops significantly, and the promise of profits exceeds expectations

 Date:2017.11.07   Publisher:NetEase

On November 6th, China Evergrande (03333.HK) announced that a total of 6 strategic investors, such as its affiliated company Evergrande Real Estate and Foxlink, Suning and Shandong Hi-speed, signed a capital increase agreement, with a total investment of 60 billion (RMB, the same below).

According to Evergrande 2017 Interim Report Data Simulation Calculation, Evergrande's net debt ratio will drop by nearly 40% after introducing 60 billion strategic investments. In fact, this is the third time this year Evergrande introduces strategic investors. In January and June of this year, Evergrande has introduced 30.5 billion and 39.5 billion strategic investment.

Industry insiders believe that, in less than a year, Evergrande successfully introduced 130 billion strategic investments, the largest equity financing in the history of domestic real estate enterprises, which not only reflects investors' approval of the development prospects of Evergrande, but also reflects Evergrande's determination to increase efficiency, reduce debt and deleverage.

The announcement also shows that Evergrande's net profit from 2018 to 2020 is 50 billion, 55 billion, 60 billion, respectively. The expected net profit of three years is 165 billion, which not only exceeds the expected profit of 88.8 billion from 2017 to 2019 last year, but also creates the highest record of A shares ever.

At the beginning of this year, Xu Jiayin, chairman of board of directors of Evergrande Group, firmly implemented the strategic transformation, by which Evergrande changed from the development strategy of "scale" to development strategy of "scale + benefit", from "three high and one low" development model of high debt, high leverage, high turnover, low cost to "three low one high" development model of low debt, low leverage, low cost, high turnover. According to the analysts, believing that after the introduction of strategic investment is completed, Evergrande's net assets will increase substantially, in order to achieve a substantial decline in net debt ratio. And Evergrande promised 165 billion profits to investors, which showed its strategic transformation effect is obvious.

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