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March 26 (The following statement was released by the rating agency)
Fitch Ratings says today Chinese homebuilder Sunac's healthier financial position and more sophisticated product positioning have strengthened its credit profile, as reflected by the company's sound results for 2013. While there is no immediate upward pressure, if Sunac can proof its resilience in the lower-growth market in 2014, there may be positive rating momentum.
Sunac's leverage is healthier with net debt/net inventory adjusted for structural subordination at 37% at end 2013, down from 43% a year earlier, mainly because of its strong growth in sales and more conservative financial management. The improved leverage, together with the slightly slower growth in sales target of around 28% in 2014 (compared with 54% actual growth in 2013), signals that Sunac is transforming from a company pursuing pure growth of business to one also focusing on quality of management and financial positions.
As a mid to high end residential property developer, Sunac attracts more housing upgraders than first-time home buyers - a key differentiating factor from most other rated developers. Its initiatives to adjust its business model, like increasing unit size to 120-150 sqm to meet target clients' evolving needs, will likely make the company more resilient in the high-end market and stabilise its expected gross profit margin at around 30% excluding impact of revaluation