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Daily Brief China: Evergrande, Xinjiang Goldwind Science & Technology, China Huarong Asset Management, XPeng, CSPC Pharmaceutical Group, Tencent, WuXi AppTec Co. Ltd., Wharf Holdings, China Life Insurance, Road King Infrastructure and more | Smartkarma

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Road King’s FY 2022 earnings were weaker than expected. The company posted a significant EBITDA decline, owing to a reduction in property deliveries amid the COVID-19 pandemic as well as a gross margin contraction. Looking ahead, we expect Road King’s FY 2023 contracted sales to remain weak, given the absence of land acquisitions in FY 2022 and the uncertain sales pipeline. This could pressure the company’s cash collections and internal cash generation. Positively, we expect Road King’s access to financing to remain sound, supported by its good quality asset base.

Overall, the company’s credit profile remains supported by its toll-road business, with cash dividends from the toll-road JVs covering 28% of FY 2022 interest expense. We expect recurring income from toll roads to increase in FY 2023, supported by the resumption of socio-economic activities in Mainland China and contribution from Road King’s newly acquired expressway in Indonesia. We believe the toll-road assets could be monetised in the event of tight liquidity, though bondholders are unlikely to have recourse to these assets in the event of debt restructuring (given the highly regulated nature of infrastructure assets).

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