Conversion pressure release and short-term concentration of Huizhou's rational view on the true value of debt restructuring (00884) after restructuring.

The current real estate industry is undergoing a profound structural adjustment, with debt restructuring becoming a key indicator to test the survival and operational resilience of troubled real estate companies. By the end of 2025, Sunac China Holdings (00884) announced the completion of domestic and foreign debt restructuring, expecting to reduce about 43 billion yuan in debt, and shifting the debt structure from "short-term high interest" to "long-term low interest", signaling that the company is steadily moving out of the severe stage of liquidity crisis. As the restructuring plan gradually unfolds, the Mandatory Convertible Bonds (MCB) formed during the debt conversion process have entered the conversion and trading phase, leading to a temporary increase in share supply. Recent market trading volume has significantly increased, causing temporary fluctuations in stock prices. However, from the internal logic of debt restructuring, this process is a common temporary phenomenon in market debt conversion, and does not shake Sunac's long-term development foundation. Short-term fluctuations caused by conversion pressure are a necessary stage in the debt restructuring process From a trading perspective, the direct cause of Sunac's stock price fluctuations comes from the temporary increase in supply after the MCB conversion, with the rate of share dilution exceeding the market's absorption capacity in the short term, putting pressure on stock prices. However, this is not unique to Sunac, but a common path for the industry to achieve substantial debt restructuring through market means. Similar cases show that property companies often see temporary share dilution and institutional selling due to liquidity and other factors when using debt-to-equity conversion and other tools to reduce debt levels. Despite the short-term disturbance to stock prices, this "short-term pain" leads to systemic repair of the balance sheet, a necessary process for companies to achieve a leaner operation. Of particular note, Sunac has achieved fundamental financial structure optimization through this restructuring: significantly reducing debt levels, with interest-bearing debt lowered to below 50 billion yuan, significantly improving the net debt ratio, providing a precious window for the company's future operations. During the industry adjustment phase from 2021 to the present, Sunac has successfully completed its delivery tasks, completed credit debt restructuring, maintained the integrity of its core operational team, becoming one of the few troubled private property companies to achieve sustainable operation. Its ability to manage risks and sustain operations has been validated. Valuations are at historic lows, with clear room for value recovery From an asset value perspective, even considering the share dilution from conversions, the substantial increase in net assets from debt restructuring is expected to maintain net asset value per share close to 1 Hong Kong dollar, providing a solid margin of safety for the company's intrinsic value and valuation. In contrast, Sunac's current stock price is less than 0.1 Hong Kong dollar, corresponding to a price-to-book ratio of less than 0.1 times, significantly below the industry average and deviating substantially from the company's historical valuation range, entering a rare undervalued state, with the long-term investment value highlighted by the "short-term overselling". As the temporary selling pressure from MCB conversions is gradually absorbed, and with business recovery and operational improvements post-restructuring progressing steadily, the severely undervalued valuations are expected to return to reasonable levels. Additionally, during Sunac's debt restructuring process, well-known international investors such as GIC and PAG have become important shareholders through MCB. Futu-CIFI HOLD GP's shareholding This kind of long-term capital deployment is not based on short-term trading, but stems from a deep recognition of Sunac's restructuring path, balance sheet repair process, and long-term operational capabilities, enhancing market confidence from a capital perspective. Citigroup's recent report also indicates that Sunac is expected to achieve a net profit of billions in the 2025 fiscal year through debt restructuring, further confirming the clear trend of improving fundamentals through debt restructuring. Short-term stock price fluctuations are more of a normal market reaction to the concentrated realization phase of debt restructuring tools, and the company's long-term trend will eventually return to fundamentals. As the selling pressure from MCB conversions is gradually released, market attention will refocus on Sunac's valuation advantages and potential for business recovery. For value investors, this may be an important time to focus on opportunities for an upside reversal for high-quality private property companies, as short-term fluctuations do not change the logic of long-term value recovery.