S&P Global Ratings has changed the outlook on China State Construction Engineering (SHA:601668) to negative from stable while affirming the A long-term issuer credit rating, according to a recent release.
The revision reflects the adverse impact of heightened competition, constrained funding, and persistent property market slowdown on the company's financial metrics.
S&P expects the company's debt to remain elevated in the next one to two years, even with a moderate rise in profits and cash flow from optimization efforts.
The rating agency sees industry pressure to weigh on the company's financial turnaround and introduce volatility to its deleveraging.
The company's annual working capital outflow will lessen to between 12 billion yuan and 20 billion yuan over the next two years, S&P said.
Still, the company's debt-to-EBITDa ratio will only decline to 4.9x by 2027, against a 5x downside trigger, which presents a narrow buffer for operational shocks, the rating agency said.
S&P views a high possibility of timely and ample extraordinary government support for the company in case of need, amid its key role in the country's urban renewal.
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