Fitch Ratings assigned Zhongliang Holdings Group Co. Ltd. a long-term foreign-currency issuer default rating of B+, with a stable outlook.
The rating agency also assigned the Chinese homebuilder a senior unsecured rating of B+, with a recovery rating of RR4.
Fitch said the company's ratings were supported by contracted sales scale, which is comparable to other homebuilders in the BB category. It believes that Zhongliang's 353 projects across China's five core economic regions help mitigate possible regional economic and policy risks. It cited low inventory and margins, strong growth and significant minority shareholders as among the factors driving the ratings.
Fitch expects the company's leverage to increase to 40% to 45% over the next three years after taking into account proceeds from its recent IPO.
The agency added that Zhongliang's faster-turnover model of selling land soon after acquisition results in a short land-bank life, as well as low adjusted inventory base and EBITDA margin, which could prove volatile for the company's financial profile.