Net Profit Growth Decline Performance Pressure Vanke Dismantling Cash Flow Management

Vanke has more emphasis on the importance of cash flow management in previous years. The company has achieved positive operating cash flow for 11 consecutive years, and the net cash flow of operating cash in 2019 has been 45 billion 690 million yuan.

As a company with a strong sense of crisis, Vanke has been carrying out the logic of "living" for two years, putting the scale and speed in a secondary position.

In March 17th, Vanke released its 2019 earnings report, the first in four big property tycoons to release its earnings. That night, management performance online communication conference, from which we can get a glimpse of this benchmark Housing enterprises for the current epidemic and annual market judgement.

The new crown disease that lasted for nearly two months is a critical moment for all housing companies to test their cash flow and financial control.

In 2019, ten thousand Kobe emphasized the importance of cash flow management. The company realized the annual operating cash flow for 11 consecutive years, and the net cash flow of operating cash was 45 billion 690 million yuan in 2019.

But under the new crown epidemic situation, cash flow management is facing greater challenges. Vanke president Zhu Ji Sheng said that the impact of the epidemic on Vanke is huge, and ultimately it comes down to the impact of cash withdrawal and cash flow. At present, the property market is gradually recovering, and the pace and speed of demand release remains to be seen.

Growth decline

The real estate market has been volatile in the past year, and Vanke has been showing off.

According to the financial report, in 2019, Vanke achieved a sales amount of 630 billion 840 million yuan, an increase of 3.9% over the same period last year, a decline of 14.5% in 2018 and a 5 year low.

Vanke net profit growth does not reach some investors' expectations. In 2019, the net profit attributable to shareholders of listed companies was 38 billion 870 million yuan, an increase of 15.1% over the same period last year, compared with 20.39% in 2018 and 30.43% in the three quarter of last year.

Access to Vanke financial report can be found that the decline in net profit growth was mainly affected by the land value-added tax, which increased by 10 billion yuan in 2019.

On the above issues, I wish you nine times that Vanke had no longer pursued simple scale growth, but rather emphasized quality. A core indicator is the rate of return and the level of repayment.

Investors are more concerned about the company's ability to repay shareholders and cash dividends. Vanke has already used ROE as a measure rather than a mere net profit. Although the decline in gross margin is a trend, it does not mean a decline in ROE. The company will continue to improve its operational management capabilities and management efficiency and improve its ability to repay stakeholders.

2019 has passed, and the pressure on Real Estate Company is more immediate. This year, the impact of the epidemic on the real estate market is not small, Vanke is no exception.

In February 2020, the sales volume of Vanke was 28 billion 590 million yuan, down 33.8% from the same period last year, and other head office prices were also bad. For example, the sales volume of country garden in February was 30 billion yuan, a decrease of 49.2% compared with the same period last year.

Zhu Chun said that the subscription amount of Vanke in 2-3 months decreased by 51 billion, especially in Wuhan, Yichang and Ezhou of Hubei. These three cities used to account for 3.2% of the Group sales, but there was no new sales after January 23rd of this year.

In addition, the epidemic has made it possible for Vanke to postpone the delivery of 10 thousand customers in the first quarter. The impact of the whole year may involve 39 thousand households. The epidemic has also delayed construction at least 40 days.

All these problems eventually lead to the pressure of cash flow. Sales refund significantly reduced, superimposed on the increase in cost of the epidemic, 1-2 years of long-term settlement also caused pressure.

Yu Liang, chairman of Vanke's board of directors, said, "the theme word of the autumn meeting of Vanke in 2018 is" to live ". At that time, we were always sober and vigilant for the sake of peace and security. But I did not expect that "living today" has become a real reality.

Investors are also beginning to worry about 2020's performance. Southwest Securities believes that the impact of the epidemic on sales is mainly on the supply side, and Vanke plans to start the 29 million 210 thousand party in 2020, down 31.1% compared to 2019, which has a certain impact on the added value this year.

According to the research of Ke Rui, sales in 1-2 months accounted for about 10% of the annual sales and accounted for about 20% in the first quarter. If sales in March did not return to normal, the annual performance of developers will be greatly affected.

Financial defense mechanism

The sense of crisis makes Vanke always take precautions and reflect on the financial strategy, which is prudent and steady style. This is also reflected in the 2019 earnings report.

In 2019, Vanke's operating cash inflow amounted to 45 billion 690 million yuan, operating cash flow for 11 consecutive years was positive; Huatai Securities said Vanke was the only business cash flow that A shares continued to be positive in the past 10 years.

The net cash flow generated by investment activities in 2019 was negative, but it was significantly improved to -286.27 billion compared with -673.64 billion at the end of 2018.

At the end of the year, Vanke held 166 billion 190 million yuan in currency capital, much higher than the sum of short-term loans and long-term liabilities due to 93 billion 890 million yuan in one year, 257 billion 850 million yuan in interest bearing liabilities, and 3 billion 380 million yuan lower than that at the end of 2018, which was the first time in the past six years to reduce liabilities, and the net debt ratio at the end of the year was 33.9%, keeping the industry low.

Under the auspices of Zhu Chun Sheng, Vanke put the cash flow management at the core of business and management very early. Under the "black swan" of the epidemic situation, Vanke pays more attention to cash flow management.

Cash flow management package revenue and expenditure adjustment, investment and financing and other aspects, the core is the repayment index.

Sales in February were almost stagnant, and Vanke focused on financing. With the outbreak of the epidemic, 1-2 months, the central bank has placed the liquidity in a more conventional way. Vanke, as a leading housing company, can get more financial support, and the financing environment is quite favorable.

Zhu said that the financing strategy of Vanke is to regard credit and brand as the largest asset, keep the credit rating at the leading level, reasonably maintain the debt ratio, develop diversified financing channels, dynamically debug strategies, and strengthen communication with cooperative financial institutions.

In February 25th, Vanke was approved by the SFC and issued no more than 9 billion yuan (including 9 billion yuan) corporate bonds, with interest rates as low as 2.6%. The first issue is now 2 billion 500 million yuan.

In the first two months, Vanke also did not take much land, the expenditure was reduced substantially, and the price of land rights and interests was only about 3000000000 Yuan. Compared to green city and Huarun, it took about 20000000000 Yuan and about 10000000000 yuan in the same period.

Is this investment strategy too conservative? Zhang Xu, executive vice president of Vanke, said Vanke would set up a position for investment and will still look for suitable opportunities this year to ensure long-term development.

But for developers, the biggest source of cash flow is sales returns. I wish you can see that the sales offices are opening gradually after March, and the number of visits will gradually return to 50%-60% in January. The pace and speed of demand release remains to be seen.

In addition, Vanke is now reworking at 80% and is expected to reach 97% in April.

Yu Liang said that opportunities are reserved for those who are prepared, not only to see danger, but also to see the machine. The demand for warehousing, logistics and cold chain brought by the epidemic, and the discovery and in-depth understanding of the crisis's impact on urban development and customer needs are important starting points for fostering future competitiveness.

"I have worked in Vanke for 30 years. I have experienced 93 or 94 years of macroeconomic regulation and control, 98 years of Asian crisis, 03 years of SARS, and 08 years of international financial crisis. There are many lessons and experiences. Every time we get a chance of development after the crisis," Yu Liang said.

He said that the smooth passage of the epidemic requires courage and responsibility, immunity and early preparation. A strong foundation of immunity and health will help businesses survive the crisis.

Huatai Securities said that Vanke does not hoard land, and its storage period can be sold for 2.7 years. It is the shortest in the mainstream Housing enterprises, which has low interest bearing leverage and strong ability to operate without interest leverage.

Zhongtai Securities believes that under the impact of this epidemic, Vanke maintains the lowest leverage level in the industry, and the best inventory turnover ratio, the best management team, will achieve growth in the opposite direction.

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