Acceleration Of Growth In The Second Half Of The Year

The report season of real estate enterprises is approaching. According to the published reports of some real estate enterprises, the performance completion rate of some real estate enterprises in the first half of the year is less than 40%. The impact of the epidemic on commercial real estate is greater, and the increase of revenue and gross profit rate is generally narrowed.

The adjustment of real estate has entered a normal state. Although many management said at the performance meeting that the company is using this cycle to adjust the urban layout, thus optimizing the financial structure, and has certain measures to cope with the "find and make up" performance in the second half of the year, it is a visible trend that the sales of real estate enterprises are under pressure in the second half of the year.

In fact, from the published newspaper, many real estate enterprises put forward the pursuit of quality growth. In other words, it is to reduce costs and increase efficiency and achieve profit increase. Previously, Lin Zhong, chairman of Xuhui group, pointed out at the Boao 21st century real estate forum that Xuhui has been balancing investment, finance, operation and cooperation leverage. He believes that financial stability is the prerequisite for development. According to its judgment, in the second half of the year, both the quantity and price were stable. The epidemic will affect sales. It is expected that with the increase of supply in the fourth quarter, the sales pressure of real estate developers will increase in the future.

Yan Yuejin, research director of the think tank center of E-House Research Institute, pointed out that with the effective control of the epidemic situation, no matter how the policy is adjusted, real estate enterprises will face a better development opportunity. From the perspective of market fundamentals, the whole industry is in the stage of recovery. In the second half of the year, the deficit sales performance in the first half of the year should be made up. Therefore, the pace of development and sales will be accelerated in the second half of the year.

Slower growth

The head of the real estate companies for performance growth has long been clear: no longer pursuit of scale, but the pursuit of quality growth. So what are the results of these enterprises in this half year?

Xincheng Holdings (601155. SH) was announced on August 21, and the overall operating performance of the company continued to grow steadily during the reporting period. In the first half of 2020, the operating revenue of Xincheng holdings reached 37.736 billion yuan, a significant increase of 121.15% year-on-year. The net profit attributable to shareholders of listed companies was 3.204 billion yuan, with a year-on-year increase of 23.59%; the net profit after deducting non attributable parent company was 2.747 billion yuan, with a year-on-year increase of 33.91%. Previously, Wang Xiaosong, chairman of the board of directors of the company, has clearly stated in the 2019 annual performance conference that the company should pursue quality growth and no longer be trapped by scale performance.

Another top 20 real estate companies also tend to polish the company's operating capacity. How to balance debt reduction and development is a lesson Sunshine City (000671. HK) has been doing since 2017. At the performance meeting at the beginning of the year, Zhu Rongbin, the executive chairman and President of sunshine city group, once made a plan for the whole year. In 2020, under the premise that the annual interest bearing liabilities will not increase and the financial indicators will not deteriorate, the new investment value will be added according to the market conditions, so as to ensure the sales growth in 2020 and the continuous growth in the future.

From the data of the semi annual report, sunshine city has achieved a balance between reducing debt and maintaining development. In the first half of 2020, the scale of interest bearing liabilities of sunshine city was controlled at 112.161 billion yuan, which remained the same in the past three years. The proportion of non bank financing continued to drop to 22.19% compared with 24.94% at the end of last year, and the debt structure was continuously optimized. In terms of relative value, the company's net debt ratio decreased to 115%, which was 23% lower than that at the end of last year, and the interest bearing asset liability ratio decreased to 33.06%, 3.46 percentage points lower than that at the end of last year, and the average financing cost was 7.5%, which was 20 basis points better than that at the end of 2019.

Those real estate enterprises that set foot in the national layout and want to overtake by the curve also face the problem of slowing down the growth rate. For example, Longguang real estate (03380. HK), which just entered Shanghai for the first time in early June, has achieved sales of 46.35 billion yuan in the first half of 2020, a year-on-year increase of 12.1%, and 42% of the annual equity sales target of 110 billion yuan. The company achieved contract sales of about 45.31 billion yuan in 2019, an increase of 27.7% compared with the same period in 2018, and achieved 53.3% of the annual sales target. In contrast, the growth rate in 2020 will slow down significantly.

There was a slight improvement in net profit. In the first half of the year, Longguang real estate realized a net profit of 6.16 billion yuan, a year-on-year increase of 20.1%. The core profit attributable to the parent company was 5.33 billion yuan, up 18.3% year on year. In the first half of 2019, the profit attributable to equity shareholders of Longguang real estate was 5.128 billion yuan, with a year-on-year increase of 49.4%; the core profit margin was 4.671 billion yuan, with a year-on-year increase of 59%; and the core profit margin reached 17.3%.

In the climbing stage of the real estate enterprises, although the growth rate of Zhongjun group remains high in the industry, the sales performance completion rate is also lower than that of the same period last year. In the first half of the year, Zhongjun group achieved a total of 40.1 billion yuan of contract sales, an increase of 8.2% over the same period of last year, and achieved 43% of the annual target; while in the first half of last year, its performance completion rate was 53%. In the first half of this year, Zhongjun's core net profit was 1.84 billion yuan, which was only slightly higher than the core net profit of 1.7 billion yuan in the same period of 2019.

The current market environment is particularly difficult for the small real estate enterprises which did not realize the layout ahead of time in previous years. Taking Jinyu group as an example, in the first half of this year, Jinyu group ranked 73rd in the industry with full caliber amount of 15.53 billion yuan. The semi annual report for 2020 released by the company showed that a number of key financial indicators were declining: revenue of 40.93 billion yuan, of which the main business income was 40.71 billion yuan, a year-on-year decrease of 7.9%; the total profit was 3.37 billion yuan, a year-on-year decrease of 36.1%; The net profit was 2.19 billion yuan, with a year-on-year decrease of 44.8%. The net profit attributable to the parent company was 1.52 billion yuan, with a year-on-year decrease of 50.0%.

Another example is capital real estate, whose mid-term performance report in 2020 shows that the company's operating revenue in the first half of the year was 9.219 billion yuan, a year-on-year decrease of 12%. The net profit attributable to shareholders was 850 million yuan, a year-on-year decrease of 28.4%; during the period, the gross profit was 2.216 billion yuan, and the net profit attributable to shareholders was 850 million yuan, with a year-on-year decrease of 28.40%.

It is worth noting that the lack of scale sales, even if the development of high-end property, also did not get good profit margin. According to the interim report of Yanlord land in 2020, the profit attributable to shareholders was 493 million yuan, down 59% from the same period last year; the gross profit margin was 35.9%, down more than 10 percentage points from 46.5% in the same period last year.

The puzzle of real estate enterprises in the second half of the year

The differentiation of real estate enterprises has become a foregone conclusion. In the second half of the year, real estate enterprises have also made response to their different situations.

In the second half of 2020, due to the uncertainty of external environment, many real estate enterprises have made some internal adjustments in advance. Similarly, taking sunshine city as an example, Zhu Rongbin pointed out that sunshine city hopes to "do the right thing for a long time", realize the virtuous cycle of "scale, debt and profit" respectively in the new development stage, comprehensively consider the use of funds and operational efficiency, and lock in large value with small investment.

For example, Baolong real estate still achieved steady growth in the first half of the year under market pressure, which is mainly due to the improvement of its product strength and the flexible adjustment of sales strategies of various projects.

By the end of July, the sales volume of Baolong real estate was 39.018 billion yuan, which had reached 52% of the annual sales target. According to the financial report data. In the first half of this year, the Yangtze River Delta accounted for 76.1% of the total value of Baolong's 385.8 billion yuan. In terms of sales, the sales amount from the Yangtze River Delta accounted for 88.6%. Baolong has a selective and emphasis on the cities in the Yangtze River Delta. Take Ningbo as an example. In the past three years, Baolong has acquired 25 land in a single city of Ningbo, with an equity of 30 billion yuan. According to Xu Huafang, President of Baolong real estate, Nanjing is the new growth pole city of Baolong.

The impact of the epidemic on commercial real estate is very large, and the willingness to "make up" the performance in the second half of the year is stronger. Baolong's business growth slowed down significantly. In the first half of the year, the total revenue was 869 million yuan, up 16% year-on-year. Compared with the previous three years, the compound growth was reduced. Among them, the business operation income was 700 million yuan, with a year-on-year growth of 12.7%, and the growth rate was also reduced compared with the previous three years. Another commercial real estate company, which is mainly engaged in commercial real estate, carries Shimao shares in the business entertainment business sector of Shimao Group. In the first half of this year, the contracted sales volume reached 9.4 billion yuan, a year-on-year decrease of 23%, and 35% of the annual target; the contracted sales area was about 400000 square meters, a year-on-year decrease of 31%.

For the current situation of the industry, Qi Jinxing, chairman of Binjiang group (002244. SZ), said that it is not the time to compete for courage and capital. Behind the performance appeal is the source of supply land. As long as the enterprise has land, there will be a continuous growth momentum and more resources for cooperation. He believes that there is no comparability in the second half of the year. It depends on the future. This year's performance is a project in 2017, and this year's profit will not be released until 2023. In the future, the key is cost control, including financing cost and sales cost. "In the current environment of pursuing refined management, it is an opportunity for enterprises like Binjiang." Qi Jinxing pointed out that real estate enterprises with loose capital and low financing cost have prominent advantages.

Industry insiders pointed out that the majority of this year has passed. No matter how the later policies are adjusted, ensuring the stable and healthy development of the real estate market is still the main keynote. At the same time, the market itself still has strong resilience and is expected to maintain a high transaction level. The second half of this year is still an important window period for real estate enterprises to rush for income.

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