Net Profit Declines In The First Half Of 2021

In 2018, Vanke held a regular autumn meeting in Shenzhen, and the slogan "live" on the screen and side wall of the venue quickly ignited the mood of the industry. At that time, most of the outside world believed that this sentence of "live" of Vanke was a wake-up call to peers. No one had ever thought that "living" would become the real existence of Vanke three years later.

Vanke handed over a poor mid-2021 newspaper. This is the first time that Vanke has recorded a decline in net profit since the 2008 annual report. According to the interim report, in the first half of this year, Vanke achieved a revenue of 167.11 billion yuan, a year-on-year increase of 14.2%, and a net profit of 11.05 billion yuan attributable to shareholders of listed companies, a year-on-year decrease of 11.7%.

At the performance meeting, Zhu Jiusheng, President and CEO of Vanke, explained the reasons for the decline in net profit, and also made a speech on the medium and long-term planning of Vanke on behalf of the management of Vanke.

Zhu Jiusheng said, "the game rules of the whole industry are changing, and Vanke's development thinking should also be adjusted accordingly. We don't take scale and speed as the only goal. We will weigh scale and benefit, short-term and long-term, risk and return. Vanke insists on "stability first", and "living" is more important than anything in our cognition. "

As in the past, Vanke did not give the market a definite performance growth plan as the same excellent enterprises as China shipping, China Resources and even Longhu. It regards stability as the first priority to live, which is beyond reproach. But Vanke, which has been outstanding for many years, is expected not only to survive, but also to live well and live long.

Under the situation that other excellent peers still perform well, Vanke's development business and business operation should also let investors and industry peers see its potential and see its bright spots worthy of being highlighted.

Review of diversified business

Vanke's overall profit data are difficult to satisfy investors compared with the previous reporting period. In addition to the decline in net profit, Vanke's profit margin level also went down again. According to the management of Vanke, the gross profit rate of Vanke in the medium term was reduced from 24% after tax to 18%, and the gross profit rate without tax deduction decreased from 32% to 23% compared with the same caliber of peers.

Even though Vanke's profit margin has declined significantly, Vanke's management believes that this pressure will still exist in the next two years.

Han Huihua, chief financial officer of Vanke, analyzed that since 2017, the land sales ratio of Vanke has been rising, so the gross profit rate of development business will show a downward trend. From the sales side gradually reflected in the settlement end, we can see that Vanke may also be such a logic from the first quarter, the middle term and even the whole year, and there will be a certain pressure on the gross profit margin in the next two years.

Profit decline and future performance are the most concerned aspects of performance. The first question raised by investors also points to this. Zhu Jiusheng described that he was in a rather uneasy mood: "this is just like the feeling when reading. When the mid-term exam results come out, how can you answer the teacher if you don't do well in the exam?"

Zhu Jiusheng also explained several reasons for the decline in net profit; Second, the gross profit rate of development business has decreased rapidly, and the proportion of land price is increasing, which will gradually reflect the settlement income and settlement profit in the future; The third is the impact of business transformation. It will take time for the transformation effect to be reflected.

Although some business data of property service, long-term apartment, warehousing and logistics and business management were released in the mid year news of Vanke, the revenue and profit were not reflected in the statement. In addition, many diversified businesses are not completely consolidated, so it is difficult for investors and peers to see the development potential of Vanke in this respect.

Zhu Jiusheng said frankly that there are a lot of reviews on the new business after the transformation of Vanke“ At that time, Vanke seriously underestimated or underestimated the time, difficulty and ability needed to complete the process. Today, we were optimistic when we came to review, review and review. "

Zhu Jiusheng said, "Vanke's transformation business also needs to change the view of its contribution point or contribution embodiment. Even if all the business services are well done and successful, its contribution to the traditional sales scale and profits may still be limited. What it can contribute is the enterprise value of a company, or the mid - and long-term valuation. "

Cast a wide net and fish carefully

On the other hand, Vanke's business strategy and financial indicators can still let the outside world see the prudence and stability of a leading real estate enterprise.

At the end of the first quarter of this year, Vanke realized that all the "three red lines" were returned to the green file and continued to be maintained. As of the end of June 2021, Vanke held currency cash of 195.22 billion yuan, with the cash short debt ratio of 1.67 times that of pre-sale regulatory funds and restricted funds; The net debt ratio was 20.2%, lower than 40% for 20 consecutive years; The asset liability ratio excluding accounts received in advance was 69.7%. In addition, the comprehensive financing cost of Vanke was 4.27% in the first half of the year, a year-on-year decrease of 32 basis points.

Zhu Jiusheng said that Vanke is timid and has always been steady, so there will be more cash on the long-term book“ In the past 20 years, the net debt ratio of Vanke is the lowest in the industry, and the net debt ratio in the past 20 years is below 40%. This is Vanke's consistent style. This style brings less benefits to Vanke than the periodic radical style. Vanke thinks that before pursuing the return to shareholders, it can be stable and live for a long time, and it may have priority over the short-term return. "

Vanke's cash holdings have reached an unprecedented volume. As a real estate enterprise that is good at acquiring merger and acquisition and land acquisition through cooperation, the current opportunity is unprecedented. At the performance meeting, Zhu Jiusheng also said that for Vanke, something beneficial to the whole industry should be done. No matter what kind of peers, they have had different contacts and cooperation. If we calculate the number of Vanke projects, about 70% of them are cooperative.

Zhu Jiusheng also responded to the rumors about the acquisition of Evergrande and the progress of taking a stake in Taihe. Zhu Jiusheng told the 21st century economic report that "Vanke and Evergrande have had project level cooperation in the past, and there have been some contacts and discussions in recent months, but there is no substantive cooperation at present." As for the progress of Vanke's investment in Taihe, Zhu Jiusheng said, "we have set up a team to closely contact with them and provide some suggestions. Projects that meet the requirements will be implemented."

"Cooperation requires stability and long-term development, which is our basic consideration. Of course, the effect of cooperation depends on customers to test. How to avoid causing trouble to customers and shareholders, or bringing adverse and unbearable influence, is a problem we should take special precautions against. " Zhu Jiusheng stressed.

As for the overall pressure on the stock price of Vanke this year, Zhu Xu, Director Secretary of Vanke, also said, "the company's share price has fallen by a large margin, and the decline of the whole real estate industry is also large."

Zhu Xu said that the stock price decline may be affected by many factors, but in the long run, it is still necessary to see whether the company can create long-term value for shareholders, and the management will always strive for this“ The partners of Vanke also hold shares, and both partners and shareholders feel the same way. "

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