Judgment in this round: the willingness of market-oriented buyers is insufficient, and the counter cyclical M & A is more difficult
In 2021, credit events occurred frequently in the real estate market, and the policy continued to increase to guide the market to close mergers and acquisitions in order to realize the liquidation of the industry. In the past 21 years, the market-oriented income M & A was relatively calm. The listed real estate enterprises actively sought asset sales, but the buyer’s willingness was insufficient. We believe that it is very difficult for this round of counter cyclical M & a wave to occur: 1) data from China and overseas show that the M & a wave often occurs in the period of sustained and rapid economic growth, and the climax of counter cyclical M & A is rare; 2) There is a strong consistency between the M & a market and the bidding, auction and listing market in terms of heat. At the moment when the bidding, auction and listing market is cold, the attitude of high-quality real estate enterprises towards M & A may also tend to wait and see.
Main concerns: we need policy and financial support, as well as stable expectations and confidence
The mean value regression of the medium and long-term industry cycle determines the prudence of the countercyclical expansion of real estate enterprises. The uncertainty of medium and short-term changes further tests the courage and determination of real estate enterprises to increase leverage. Further promoting M & A requires policy and financial support, as well as stabilizing the expectations and confidence on the demand side. The main constraints of this round of M & A may be: 1) there are concerns about the short-term reversal of demand expectations on the demand side; 2) Limited financing channels and insufficient leverage space; 3) The hidden worries of adjusting the cost and post event risk in the practical level; 4) Taking land at a high price brings limited bargaining space for assets; 5) Limited by the decision-making process, state-owned enterprises make relatively slow efforts.
Future outlook: the policy toolbox is sufficient and the level of participants is rich
Policy: China has some experience in supply side regulation of coal / steel industry before, and there are some replicable tools in all aspects of the policy toolbox. We believe that in the future, the regulation on the supply side of real estate will still focus on market-oriented clearing under tight balance, and the accuracy of policy rhythm and strength is high. The supply side can further look forward to: 1) further improvement of support for collection and M & A, directional expansion of credit, and promotion through government led superposition of policy preferences and other measures at the local level; 2) Optimization of pre-sale fund supervision system; 3) Support industry transformation; Demand side: the stability expected on the demand side and the restoration of confidence are needed to promote industry mergers and acquisitions. Therefore, the demand side regulation may focus on stabilizing the market, and the easing intensity is expected to increase simultaneously, but it is difficult to return to the stimulus route. The tight balance under the expected stability may be the best state to promote the acquisition and merger, so that the real estate enterprises in danger can give up their illusions and give the acquirer confidence in the stable development of the industry.
Main body: or high-quality listed real estate enterprises as the main body, with real estate urban investment and AMC as the two wings. 1) Listed real estate enterprises: the first to play a role and bear the main responsibility; Neutral calculation results show that under different scenarios where M & A loans are not included in the three red lines / further liberalization of equity refinancing (10%), the upper limits of the size of assets that can be leveraged by Green Housing enterprises are 5.22 trillion and 6.45 trillion respectively. 2) Local urban investment: credit differentiation intensifies, and high-quality local urban investment is optimistic about participating in this round of M & A. 3) Asset management companies: they have rich experience in dealing with non-performing assets, which can provide a strong supplement for the market-oriented liquidation of the industry.
Strategy: grasp the beta of loose policy structure and the alpha of M & A
The industry beta depends on the adjustment of industry structure, the pace of capacity clearing and the strength of policy support. With the increasing pressure on fundamentals and credit in the first quarter, the demand regulation policy needs to be further relaxed; Alpha focuses on the repair of the balance sheet and profit margin of key real estate enterprises by M & A, the accuracy of countercyclical plus leverage, and the long-term excavation of the value of housing scenarios. Policy support and actual M & A are expected to continue to land. Recommendation: 60000003 {6000019, {6000013} of the group’s high-quality}; 2) High quality growth: Jinke Property Group Co.Ltd(000656) , Seazen Holdings Co.Ltd(601155) , Xuhui holding group; 3) Quality property management: Country Garden service, xinchengyue service, Greentown service, China Merchants Property Operation & Service Co.Ltd(001914) , poly property, Xuhui Yongsheng service.
Risk warning: industry credit risk spread; Industry sales are down; Regulatory policies exceed expectations; Some estimates are based on certain assumptions, and there is a risk of subjective measurement deviation
