Credit rating of this Bond (Product 1): AAA
Credit rating of this Bond (Product 2): AA
Credit rating of the issuer: AA
Rating outlook: Stable
Scale of this issuance: No more than CNY700 million (inclusive), including Product 1 not exceeding CNY300 million (inclusive), and Product 2 not exceeding CNY400 million (inclusive)
Maturity of this Bond: No more than 3 years (inclusive) for Product 1, and no more than 5 years (inclusive) for Product 2
Debt servicing method: Annual interest payment, repayment of principal at maturity.
Guarantor: Shenzhen Hi-tech Investment Group Co., Ltd.
Method of guarantee: Provide unconditional irrevocable joint liability guarantee for this Bond (Product 1)
Rating Assigned Date: April 25, 2019
Key financial data
Issuer: Suzhou Electrical Apparatus Science Academy Co., Ltd.
|
Item |
2015 |
2016 |
2017 |
June, 2018 |
|
Total assets (CNY 100mn) |
38.21 |
37.40 |
37.92 |
39.00 |
|
Owners’ equity (CNY 100mn) |
13.66 |
19.11 |
19.96 |
19.72 |
|
Long-term liabilities (CNY 100mn) |
5.75 |
6.74 |
3.97 |
7.41 |
|
Total liabilities (CNY 100mn) |
21.63 |
15.57 |
15.07 |
16.71 |
|
Revenue (CNY 100mn) |
4.17 |
5.53 |
6.43 |
3.29 |
|
Net profit (CNY 100mn) |
0.27 |
0.71 |
1.26 |
0.52 |
|
EBITDA (CNY 100mn) |
2.16 |
3.17 |
4.08 |
- |
|
Net cash flow from operating activities (CNY 100mn) |
2.57 |
3.41 |
4.03 |
2.09 |
|
Operating profit margin (%) |
48.12 |
47.88 |
50.54 |
46.60 |
|
ROE (%) |
1.96 |
4.35 |
6.47 |
2.64 |
|
Debt-to-asset ratio (%) |
64.24 |
48.91 |
47.38 |
49.43 |
|
Total debt capitalization ratio (%) |
61.29 |
44.89 |
43.03 |
45.87 |
|
Current ratio (x) |
0.41 |
0.54 |
0.50 |
0.73 |
|
Debt/EBITDA ratio (x) |
0.10 |
0.20 |
0.27 |
-- |
|
EBITDA-to-interest coverage ratio (x) |
1.90 |
3.05 |
5.01 |
-- |
|
EBITDA /scale of this Bond (x) |
0.31 |
0.45 |
0.58 |
-- |
Guarantor: Shenzhen Hi-tech Investment Group Co., Ltd.
|
Item |
2015 |
2016 |
2017 |
|
Total assets (CNY 100mn) |
82.02 |
78.99 |
134.70 |
|
Owners’ equity (CNY 100mn) |
63.96 |
65.59 |
111.96 |
|
Balance of guaranteed liability (CNY 100mn) |
658.78 |
1,201.05 |
1,011.05 |
|
Net assets/ balance of guaranteed liability ratio (x) |
10.30 |
18.31 |
9.03 |
|
Revenue (CNY 100mn) |
9.34 |
11.01 |
15.05 |
Note: 1. Data in this report refers to consolidated data unless indicated otherwise; 2. The difference between the sum of sub-totals and grand totals in this report is due to rounding-off; unless otherwise stated, the currency used here refers to the Chinese yuan (CNY); 3. Interest-bearing debts of other current liabilities and long-term payables have been adjusted to the accounts of short-term liabilities and long-term liabilities respectively; 4. The data in the financial statements from January to June 2018 have not been audited, and the relevant indicators have not been annualized.
Rationale
United Credit Ratings Co., Ltd.’s (hereinafter referred to as “United Ratings”) rating to Suzhou Electrical Apparatus Science Academy Co., Ltd. (hereinafter referred to as the “Company” or “SEASA”) reflects the facts that the Company is one of the leading firms in China’s electrical apparatus testing industry and the only independent third-party testing agency in China that can simultaneously offer high and low voltage electrical apparatus testing services. As a leading player in the industry with a relatively comprehensive testing qualification, it boasts the largest market share in the industry. In recent years, the Company’s testing capability has been improved continuously, with ever-increasing income and assets and a good cash flow from operating activities. At the same time, United Ratings also noted the factors that may have adverse impact on the Company’s credit rating, for instance, fierce competition in the electrical apparatus testing industry and relatively large impact of government policies on the Company’s operations, the Company’s large scale of investment in projects under construction, the relatively heavy debt burden and high proportion of short-term debt, as well as significant erosion of its operating profits from operating expenses during the period.
In the future, the Company will continue to improve its testing system and establish an evaluation center, expand the scope of testing services, and increase its influence in the industry at both home and abroad. The Company’s overall strength is expected to get further enhanced. The rating outlook given by United Ratings for the Company is “stable”.
Shenzhen Hi-tech Investment Group Co., Ltd. (hereinafter referred to as “Shenzhen Hi-tech Investment”) has provided unconditional irrevocable joint liability guarantee for this Bond (Product 1). Shenzhen Hi-tech Investment is a state-owned holding company funded by the Shenzhen municipal government. The Shenzhen-based firm has developed a complete chain of financial services such as guarantee, venture capital and microfinance services. With significant support from its shareholders in recent years, Shenzhen Hi-tech Investment has obtained sufficient capital. The guarantee it provides has a significant enhancement on the credit rating of this Bond (Product 1).
United Ratings concludes that the risk of a default on this Bond’s (Product 1) repayment is extremely low, and a default on this Bond’s (Product 2) repayment is very low, based on a comprehensive assessment of the issuer’s long-term credit history and its ability to repay debts associated with this Bond including Product 1 and Product 2.
Strengths
1．As the only independent third-party testing agency in China that can simultaneously provide high- and low-voltage electrical apparatus testing services and as a leading player in the industry with a comprehensive testing qualification, the Company boasts the largest market share in the industry.
2．As more laboratories have been built and put into use in recent years, the Company has further enhanced its testing capability and consolidated its leading position in the industry by providing customers with "one-stop" testing services.
3．In recent years, the company’s operating scale has continued to expand, generating good cash flow from operating activities.
4．Shenzhen Hi-tech Investment, the guarantor, has sufficient capital with significant support from its shareholders in recent years. The guarantee it provides has a significant enhancement on the credit rating of this Bond (Product 1).
Concerns
1． Policy protection can be easily found in the electrical apparatus testing sector in which the Company is engaged. Any changes in the industry’s regulatory policy in the future may lead to the removal of the qualification barriers, which may greatly intensify the competition in the industry and may have a significant impact on the Company's operation.
2． In recent years, the scale of investment in the construction of the Company’s testing system is relatively large. The Company is facing certain pressures on capital expenditures, and return on investment out of these projects may not meet the expectations after they are put into operation.
3． The Company has a relatively heavy debt burden and high proportion of short-term debt, and its debt structure needs to be improved; with significant erosion of operating profits from operating expenses during the period, the cost control ability of the Company also needs to be improved.
Analysts
Ye Weiwu
Tel: 010-85172818
Email: yeww@unitedratings.com.cn
Fan Qin
Tel: 010-85172818
Emai: fanq@unitedratings.com.cn
Fax: 010-85171273
Address: 12/F PICC Tower, No. 2 Jianguomenwai Avenue, Chaoyang District, Beijing (100022)
Http://www.unitedratings.com.cn