(Bloomberg) -- China Evergrande Group’s pledge to remake itself as a leaner company with a focus on controlled growth has been met with skepticism, with analysts concerned margins will suffer and others saying investors need more clarity.

China’s most indebted developer unveiled a three-year plan on Tuesday titled ‘Growing Sales, Controlled Scale & Reduced Leverage’. The aggressive strategy includes cutting total debt load by 50%, boosting sales and trimming its land bank. Evergrande also Tuesday reported its first fall in annual profit in four years.

Evergrande’s new strategy “should fail to deliver sustainable quality growth,” Bloomberg Intelligence analysts Kristy Hung and Patrick Wong said. “Margins will likely suffer at the expense of volume, as an absence of housing stimulus and weak demand in low-tier cities sustains the need for price cuts.”

Under the plan, Evergrande is targeting sales growth of 800 billion yuan ($113 billion) this year and 1 trillion yuan in 2022 while shrinking its land bank to 200 million square meters in 2022. A land bank of that size would cover just two times sales that year, hinting at “a questionable long-term growth outlook,” Hung and Wong said.

The property developer is curbing its debt-fueled expansion in light of the government’s firm stance against housing speculation, founder and Chairman Hui Ka Yan said during Tuesday’s media briefing. Hui, who also wants Evergrande to become an electric-vehicle powerhouse, is China’s fourth-richest person with a net worth of $19.8 billion, according to the Bloomberg Billionaires Index.

More Clarity

Evergrande plans to cut interest-bearing debt by 150 billion yuan each year through 2022, Vice President Xia Haijun said. The figure ended 2019 at 800 billion yuan, near an all-time high. After the three years, Xia said Evergrande’s gearing will be at a low- to-medium level in the property sector.

It’s Evergrande’s first public pledge to cut debt levels. In a previous multiyear target to pare borrowings, the developer ended up lowering gearing through an equity increase, while its debt load nudged higher. A borrowing binge helped Evergrande accumulate land and triple sales in just three years.

“It takes time to prove” a new strategy, Citigroup Inc. analysts led by Griffin Chan said. “Even if its goal could be ultimately realizable, investors will need more clarity on earnings growth and track record on deleveraging.”

The bank maintained its sell rating on the group’s Hong Kong-listed stock.

©2020 Bloomberg L.P.