Liquidity could improve on policy relaxation

■ Logan’s unaudited FY21 core net profit declined by 20% yoy, with property
sales GPM down 7% pts yoy to 20%.
■ We estimate a 20% yoy decline in contracted sales in FY22F, given its slow
1Q22 sales vs. 1Q21.
■ We think recent policy relaxation would enable Logan to improve liquidity and
negotiate repayment extensions. Reiterate Add with a lower TP of HK$3.5.

Unaudited FY21 results: core net profit down 20%

Logan Group published unaudited FY21 results last week, with core net profit down 20%
yoy to Rmb9.6bn. No DPS will be declared until its auditor (Ernst & Young) finalises the
audited FY21 results, which Logan expects to be published no later than 30 Apr. Our
analysis and forecast changes are based on the assumption that there are no material
discrepancies between the unaudited results and that approved by the auditor.

GPM to hover around 20%

Logan’s property sales booking’s gross profit margin (GPM) declined by 7% pts to 20% in
FY21 as properties with high land costs were delivered. We expect its booking GPM to
hover around 20% in FY22-23F on prevailing price caps, as well as an increasing
proportion of contracted sales in Yangtze River Delta (YRD).

We estimate a 20% decline in FY22F attributable contracted sales

Logan’s attributable contracted sales increased 16% yoy to Rmb140bn in FY21. Based
on its latest sales performance (-53% yoy in 2M22 and Rmb6.6bn sales in Mar 22 based
on CRIC’s estimates) and the latest relaxation of property market policies in individual
cities, we estimate a 20% decline in its FY22F contracted sales to Rmb112bn, equivalent
to a 56% sell-through rate, assuming Rmb200bn saleable resources. As it slowed land
acquisition in 2H21, we think Logan would attempt to speed up replenishment of
landbank through conversion of urban redevelopment projects.

Liquidity could improve upon policy relaxation

We understand that international credit rating agencies have downgraded Logan in the
past two months on concerns of its repayment ability for its onshore and offshore debts.
We argue, however, that given the recent relaxation of property market policies on the
city level, Logan’s cash collection could improve over the next few months and it could
negotiate extension of debts soon due.

Reiterate Add, with a lower TP

See p.2 for EPS revisions and NAV changes. We cut TP for Logan to HK$3.5, based on
a wider 70% discount to NAV (55% previously), in view of its weaker liquidity and
profitability than our previous forecast. We think its current price has reflected most
negative factors affecting its liquidity and sales and reiterate our Add rating. Key
downside risks: material discrepancies between its audited and unaudited financials and
demand for early repayment of its debts by lenders. Significant improvement in its
offshore and onshore liquidity is a key re-rating catalyst.