Fitch Ratings Assigns Huangshan Tourism Group Co., Ltd. a First-Time 'BBB-' IDR with a Stable Outlook

Strategic Insights -

Fitch Ratings has assigned Huangshan Tourism Group Co., Ltd. (HSTG), a state-owned entity, a first-time 'BBB-' Long-Term Issuer Default Rating (IDR) with a Stable Outlook. HSTG is the sole cultural and tourism industry operation platform under the Huangshan municipal government's State-owned Assets Supervision and Administration Commission (SASAC). The rating reflects Fitch's internal assessment of the creditworthiness of Huangshan municipality, based on the Government-Related Entities (GRE) Rating Criteria, and a very strong likelihood of government support.

Key Takeaways:

  • HSTG's IDR is aligned with the internal credit assessment of Huangshan municipality, reflecting a very strong likelihood of government support.
  • The company's business profile is characterized by a significant competitive advantage, stability in the tourism segment performance, and solid financial flexibility, but is constrained by high net leverage.
  • HSTG's SCP is supported by its Standalone Credit Profile (SCP) of 'bb-', which incorporates a support score of 55 points out of a maximum of 60.
  • The company's financial flexibility is supported by a sufficient interest coverage ratio, with anticipated EBITDA interest coverage of 2.5x over the next two years.
  • HSTG's ratings incorporate a support score of 55 points out of a maximum of 60, reflecting a high likelihood of government support.
  • The company's financial performance is constrained by high net leverage, with elevated leverage to stabilize at 8.5x-9.0x over the next two years.
  • HSTG's peer analysis shows its IDR is aligned with our internal assessment of Huangshan municipality, with a strong decision-making and oversight factor, strong precedents of support, and a very strong preservation of government policy.
  • Factors that could lead to a negative rating action are a negative revision of our internal credit assessment of Huangshan municipality and weaker likelihood of support from the local government.

Statistics:

  • 30% of Huangshan's GDP is derived from tourism.
  • HSTG's revenue fell by 14% to CNY2.6 billion in 2024.
  • Tourist numbers to the Huangshan Scenic Area are expected to rise by 5% in 2025.
  • Gross profit margin is expected to remain stable across all segments except for property, which decreases to 18% in 2027.
  • Negative working capital outflows from the property development business in 2025.
  • HSTG has around CNY3.1 billion of reported cash and CNY9.56 billion of uncommitted credit facilities available for drawdown as of end-2024.

Sources:

  • Fitch Ratings (April 29, 2025)
  • Fitch's Government-Related Entities Rating Criteria
  • Fitch's Eurobond issuance
  • Fitch's ESG Relevance Scores