A waterproofing materials payment on the books of Beijing Oriental Yuhong Waterproof Technology Co., Ltd. (ASX: 002271) has gone uncollected for more than four years.

On October 9, SUNAC (HKEX: 1918) announced on the Hong Kong Stock Exchange that the Hong Kong High Court had issued a registration order concerning the "guarantee contract dispute" between Oriental Yuhong and Sun Hongbin.

Sun Hongbin has once again stepped into the spotlight, and Oriental Yuhong's long-overdue property-sector receivable has resurfaced.

This is not a new dispute, nor is it a new debt. At its core, it is a payment owed to Oriental Yuhong by Sunac Real Estate, with Hong Kong serving only as the place of enforcement. The registration order is not a new judgment either; it registers a judgment that already took effect in a mainland court in 2025.

For Sun Hongbin, this is a cross-border registration of personal guarantee liability: he is required to bear joint and several guarantee responsibility for the principal of the debt, approximately RMB 310 million, along with related capital occupation fees.

For Oriental Yuhong, RMB 310 million is roughly equivalent to half of its net profit attributable to shareholders in the first half of 2026 and accounts for 2.1% of revenue for the same period, a considerable weight.

But although Sunac and Sun Hongbin bear repayment obligations at the legal level, the actual prospects for recovering this claim are hardly optimistic.

Why the RMB 310 Million Claim Reached Sun Hongbin Personally

The origin of this debt lies more than a decade ago. Starting in 2013, Oriental Yuhong and Sunac began business cooperation, when Sunac was in a period of rapid nationwide expansion, deepening its presence in core first- and second-tier cities, with residential projects springing up everywhere and strong demand for building waterproofing membranes, waterproof coatings and supporting construction services.

Oriental Yuhong supplied Sunac's major projects for a long time, and Sunac at one point ranked among Oriental Yuhong's top five core customers.

The turning point came on May 12, 2022, when SUNAC announced on the Hong Kong Stock Exchange that interest on four senior U.S. dollar notes maturing successively in April had not been paid within the grace period, and that notes with an outstanding principal of US$741.6 million were also expected to be unpaid.

The batch of project payments and materials payments in Oriental Yuhong's hands thus turned overdue and could not be collected according to the original payment schedule.

What followed was the most common approach in the property supply chain: debt-for-asset swaps. In March 2024, the Beijing No. 2 Intermediate People's Court issued a debt-for-asset ruling, transferring part of the property of the InterContinental Chengdu Global Center Paradise Hotel under Sunac to Oriental Yuhong.

The hotel has a gross floor area of 105,000 square meters and 975 guest rooms; it had failed to sell in two previous judicial auctions, was valued at about RMB 1 billion at the time, and was booked by Oriental Yuhong at RMB 855 million.

On February 28, 2025, Oriental Yuhong's debt restructuring announcement disclosed that in 2024 the company obtained physical assets from Sunac and Xincheng through judicial rulings as debt repayment, with a total book value of corresponding claims of RMB 1.813 billion.

Among these, Sunac-related debt-repayment assets had a book value of RMB 1.764.5 billion (RMB 855 million for the InterContinental Chengdu Global Center, RMB 190 million for Chongqing Jinhua Hotel, RMB 339.5 million for Chongqing Jiahua Hotel, and RMB 380 million for Qingdao Oriental Movie Metropolis land), while Xincheng Real Estate's debt-repayment shops corresponded to claims of RMB 48.9179 million.

But after the offset, Sunac's account was still not settled. According to a Bloomberg report on May 7, 2026, the remaining shortfall exceeded RMB 418.5 million.

On April 17, 2026, Oriental Yuhong filed with the Hong Kong High Court to seek enforcement of the 2025 mainland court judgment against Sun Hongbin personally; on October 9, the registration order landed.

The reason it can reach the individual is that the guarantee came first: Sun Hongbin provided a personal guarantee to Oriental Yuhong for Sunac Real Estate's contractual obligations.

But obtaining a registration order and obtaining money are two different things. Sun Hongbin has pledged a great deal for Sunac: a US$450 million interest-free loan was converted into equity during the 2025 restructuring; about RMB 15.4 billion of onshore public bonds were extended, for which he provided a personal unlimited joint and several liability guarantee; and more than 90% of his shares in SUNAC are pledged.

There are two sets of shareholding calculations: according to Sunac's 2026 interim report, as of June 30 Sun Hongbin's interest totaled about 23.16%; if the unissued conversion shares of mandatory convertible bonds held by his controlled entities are included, the figure is 28.82%.

Based on the closing price of HK$0.625 on October 9, the corresponding shareholding value is about HK$2.89 billion, and a considerable portion is held in family trusts and subject to a six-year lock-up period.

The announcement also stated that "Sunac Real Estate and Oriental Yuhong are negotiating a settlement plan," which is the only public information directly pointing to the next direction.

For Oriental Yuhong, RMB 310 million is equivalent to 2.1% of first-half 2026 revenue (RMB 14.867 billion), 50.5% of net profit attributable to shareholders (RMB 613 million), and 4.1% of net accounts receivable (about RMB 7.55 billion). It has great leverage on profit but limited weight on the balance sheet.

More importantly, this claim has most likely already been provisioned for losses on the books, though the company has not disclosed the specific provision amount. If part of it can be recovered later, it will create a reversal of impairment and directly boost profit; if it cannot be recovered, it will not deal a shock to the financial statements.

Sunac Is Still Adding New Overdue Debts, and Oriental Yuhong's Old Accounts Are Still Not Cleared

On the same day SUNAC disclosed the registration order, Sunac Real Estate, the entity that actually owes the money, also issued an announcement: the company and its subsidiaries had newly added overdue borrowings, involving 12 bank loans and other interest-bearing debts, while also adding one dishonest act.

The defaults were concentrated at the end of September. Sunac Real Estate acknowledged in the announcement that the above situation would have a certain adverse impact on the company's production and operations as well as its debt-servicing capacity, and said it was communicating and negotiating with relevant institutions and creditors and considering seeking an overall resolution plan.

This forms a sharp contrast with the situation at the listed company level: SUNAC had just completed a restructuring of about US$9.55 billion in offshore debt from November to December 2025; but the entity that actually owes Oriental Yuhong money is this onshore wholly owned subsidiary, which is still continuously adding overdue debts and has been listed as a dishonest judgment debtor.

There are also variables on Sun Hongbin's side. The announcement stated that he is seeking legal advice on the relevant court order and reserves the right to apply to have the registration set aside.

For Oriental Yuhong, this is a reality that is not surprising: the legal repayment obligation is clear, and Sun Hongbin personally must bear joint and several liability, but the principal debtor that should actually pay is still in debt distress.

The money is more likely to be repaid through a discount, an extension, or continued debt-for-asset swaps rather than RMB 310 million in cash arriving in full.

Financial commentator Guo Shiliang believes that the amount recovered is likely to be relatively small and recovery will be difficult. The current problems include offshore trusts, family trusts, prior pledges and other issues, and attention needs to be paid to repayment ranking and whether the trusts are sham in nature. Recovering the money may require a large amount of time, energy and manpower, with high difficulty and high time cost.

Oriental Yuhong makes waterproofing membranes and waterproof coatings, and its downstream customers have long been mainly real estate developers. This business followed developers' scale expansion during the property upcycle.

When the property liquidity crisis broke out in the second half of 2021, the company was forced to turn around: from direct sales to major clients toward retail and engineering channels, and it actively abandoned customers with high credit risk.

In 2024, revenue from direct sales businesses the company abandoned fell by about RMB 6 billion year on year, a decline of 58.8%, dragging full-year operating revenue down 14.52%.

Reflected on the books, the scale of accounts receivable has indeed been shrinking. Notes receivable and accounts receivable fell from RMB 11.387 billion at the end of 2022 to RMB 5.94 billion at the end of 2025, nearly halving in three years.

But bad debts did not decline along with it; instead they accumulated rapidly. The bad debt provision ratio rose from 9.66% at the end of 2022 to 35.35% in 2025; bad debt provisions also increased from RMB 1.163 billion to RMB 3.079 billion.

Simply put, the company itself judges that the remaining accounts are increasingly difficult to collect. Changes in aging are even more intuitive. At the end of 2024, accounts receivable aged more than three years stood at RMB 2.29 billion; by the end of June 2026, that figure had risen to RMB 3.226 billion.

In terms of timing, these correspond to receivables formed during the concentrated outbreak of developer distress from 2021 to 2022. Impairment losses directly reduce current-period profit.

In 2024, the company made asset impairment provisions of about RMB 1.067 billion, including RMB 798 million in bad debt losses on accounts receivable; this was also the main reason why operating revenue that year was RMB 28.056 billion while net profit attributable to shareholders was only RMB 108 million, plunging 95.24% year on year.

In the first half of 2026, notes receivable and accounts receivable rose back to RMB 7.703 billion, up 29.67% from the end of the previous year—of which gross accounts receivable were RMB 11.033 billion, with bad debt provisions already made of RMB 3.486 billion.

The scale was compressed from 2022 to 2025, then rebounded in the first half of 2026, while the process of aging and heavier provisioning has not ended.

Sunac's RMB 310 million belongs to the same category of old accounts; whether it is still on the books and how much has been provisioned has not been disclosed by the company.

The "Waterproofing Maotai" Turns Around: New Businesses Break Through, Legacy Receivables Become a Long-Term Burden

Oriental Yuhong is a private manufacturing company. Founder Li Weiguo started out in waterproofing engineering in 1995 after leaving his job. He was born in 1965 in Taoyuan County, Changde, Hunan, and graduated from Hunan Agricultural College. In March 1998 he founded Oriental Yuhong in Beijing, and on September 10, 2008, the company listed on the Shenzhen Stock Exchange, becoming the "first listed waterproofing stock."

Over the following decade or so, the company benefited from the dividends of real estate and infrastructure: revenue grew from RMB 712 million in 2008 to RMB 31.934 billion in 2021, net profit attributable to shareholders reached RMB 4.205 billion, and market value once climbed to RMB 161.9 billion, earning it the investor nickname "Waterproofing Maotai."

The turning point also came in 2021. That year the company launched an employee stock ownership plan, and Li Weiguo personally backstopped the funds of participating employees; it was also the year the stock price peaked.

In 2022, Oriental Yuhong saw its first simultaneous decline in revenue and profit since listing—revenue was RMB 31.214 billion, while net profit halved to RMB 2.12 billion. Over the next three years, the company's main theme shifted from grabbing scale to collecting old debts.

As of the close on October 9, the company's total market value was RMB 26.037 billion, only about 16% of its peak.

The good news is that new businesses have grown. First-half 2026 revenue was RMB 14.867 billion, up 9.57% year on year, the first positive growth for the period in nearly three years; net profit attributable to shareholders was RMB 613 million, up 8.67% year on year, and gross margin was also rising.

The engines are retail and overseas: retail revenue was RMB 6.346 billion, up 25.44% year on year, with its share rising to 42.68%; overseas revenue was RMB 1.772 billion, up 207.55% year on year, mainly from consolidation of Chile's Construmart, Hong Kong's World Hardware, and Brazil's Novakem.

Direct sales tied to property developers continued to shrink, with revenue falling to RMB 2.023 billion and its share dropping to 13.61%.

The company transformed its direct sales team, once tied to major developers, into an engineering-side "platform plus maker" partner system, currently with more than 13,000 engineering partners; on the retail side it simultaneously built a lower-tier network, forming more than 250,000 distribution outlets and more than 2,000 specialty stores.

The bad news is that old accounts are still reducing profit. First-quarter net profit attributable to shareholders was RMB 402 million, the highest for any first quarter in history; in the second quarter it fell to RMB 212 million, down 43.14% year on year.

The gap mainly came from impairment: in the first half, asset and credit impairment provisions were RMB 696 million (most of it in the second quarter), the majority of which was bad debt losses on accounts receivable.

The funding gap is more intuitive. At the end of June, monetary funds were RMB 4.183 billion, while short-term borrowings were RMB 6.262 billion, meaning cash could not cover short-term debt; adding non-current liabilities due within one year of RMB 1.123 billion and long-term borrowings of RMB 1.036 billion, interest-bearing liabilities totaled about RMB 8.421 billion.

The debt-to-asset ratio of 51.76% hit a five-year high for an interim report, while the current ratio of 1.05 and quick ratio of 0.89 both fell to five-year lows; financial expenses were RMB 138 million, up 47.23% year on year.

The company currently has no outstanding bonds, and its RMB 8.421 billion of interest-bearing liabilities are mainly bank borrowings, so there is no rigid repayment pressure from the bond market, but cost and refinancing pressure on the bank side are real.

When will the old accounts be cleared? The peak of impairment provisions has most likely passed, but it is not over; provisions were still being made in the first half of 2026, and accounts receivable aged more than three years are still increasing.

The debt-clearing cycle in the real estate industry is still continuing, and for upstream building materials companies like Oriental Yuhong, the path to collecting existing bad debts remains long.

Obtaining a court registration order is only one part of debt collection. How much of the claim can ultimately be recovered and at what price the debt-repayment assets can be converted into cash remain uncertain.

The transformation story of the waterproofing leader has already begun, but the quagmire of legacy developer receivables still needs time to be slowly digested.