On March 22, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) held an online performance briefing. When asked about the business plan for 2022, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) management chose to seek “stability” – the sales target of 330 billion yuan was consistent with that of last year, which was basically the same as that of 2021. However, on the premise of increasing income without increasing profits for two consecutive years and the top of sustainable debt, I’m afraid that a non growth sales target can not solve the problem of how to stabilize China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) who once took land on a large scale.
performance: continuous negative profit growth
The annual report shows that China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) achieved an operating revenue of 160643 billion yuan in 2021, with a year-on-year increase of 23.93%; The net profit attributable to shareholders of listed companies was 10.372 billion yuan, a year-on-year decrease of 15.35%; The deducted non net profit attributable to shareholders of listed companies was 8.859 billion yuan, a year-on-year decrease of 2.46%; The basic earnings per share was 1.16 yuan, a year-on-year decrease of 20.55%.
From the financial report data, this is the second negative profit growth after China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) completed the restructuring. In 2020, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) achieved an operating revenue of 129621 billion yuan, a year-on-year increase of 32.71%. The net profit attributable to shareholders of listed companies was 12.253 billion yuan, a year-on-year decrease of 23.58%; The net profit attributable to shareholders of listed companies was RMB 9.082 billion, a year-on-year decrease of 27.19%.
For the situation of “increasing income without increasing profit”, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) responded that the area of the company’s real estate projects completed, delivered and carried forward during the reporting period increased, so the carry forward income of real estate business increased, but affected by the downward market, the carry forward gross profit margin of real estate business decreased year-on-year.
Compared with last year’s financial report, the key points of the two times are attributed to the “year-on-year decline in the gross profit margin carried forward by real estate business”.
The reporter of Beijing Business Daily found that the gross profit margin of China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) has continued to decline since 2018. From 2018 to 2021, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) the gross profit margin was 39.49%, 34.65%, 28.69% and 25.47% respectively, of which the community development and operation business with the largest proportion of revenue showed a significant decline.
While the gross profit margin declined, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) another 4.372 billion yuan was withdrawn for impairment China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) said that the company conducted an impairment test on the assets with signs of impairment as of December 31, 2021 according to the market reference price. According to the impairment test results, the provision for asset impairment of inventories, investment properties and long-term equity investment and the provision for credit impairment of receivables of major risk categories totaled 4.372 billion yuan. Affected by the provision for impairment, the company’s net profit decreased by 3.456 billion yuan in 2021.
Yan Yuejin, a real estate analyst, said that China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) this move is also to pay for the previous land at a high price. If the land at a high price is subject to the price limit policy, the profit erosion will be mainly reflected in the financial report data. “The decline of gross profit margin has become a common phenomenon in the real estate industry.”
liabilities: green file with perpetual debt
In addition to the increase in income but no increase in profit caused by the decline in the overall profit of the environment, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) carrying more than 20 billion perpetual debt has also become one of the reasons for eroding the company’s profits.
According to the disclosure of the annual report, as of the end of 2021, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) the asset liability ratio after excluding advances received was 61.67%, the asset liability ratio without excluding advances received was 68.94%, the net liability ratio was 42.82%, and the cash short debt ratio was 1.25 According to the standard of “three red lines”, it is a “green” real estate enterprise that meets all the standards.
However, the “three red lines” index of China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) has a special note that “the perpetual bonds included in the owner’s equity issued after August 2020 have been excluded in the calculation of net assets and increased in the calculation of total liabilities and interest bearing liabilities”.
The biggest feature of perpetual bond is that it has no fixed term and contains the redemption right of the issuer. It can also be understood as a bond that only needs to pay “interest”. Although its essence is debt, it can be included in the owner’s equity. There is no clear repayment period, and the interest cost is not low.
By the end of 2021, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) existing perpetual bonds were 24.099 billion yuan, an increase of 3.625 billion yuan over the end of last year, and the interest paid on perpetual bonds last year was about 1.426 billion yuan. But how to solve this problem, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) but did not give the answer.
task: sales target without growth
Throughout 2021, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) accumulated 146447 million square meters of contracted sales area, with a year-on-year increase of 17.77%; The total contracted sales amount reached 326834 billion yuan, a year-on-year increase of 17.73%. According to its sales target of 330 billion yuan set at the beginning of last year, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) achieved 99.04%, only one step away from the annual target.
At the performance meeting on March 22, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) the management continued to shout out the annual sales target of 330 billion yuan.
China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) managing director Jiang Tiefeng introduced at the meeting that last year’s market was a “strong before weak” market, which sold in the first half of the year and snapped up in the weak market in the second half of the year. “Up to now, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) available sales value is sufficient, and the annual available sales value is more than 620 billion yuan. In terms of the proportion of urban energy level, the first tier cities account for 28%, the second tier cities account for 48%, and the third and fourth tier cities account for 24%.”
In the future land acquisition, Jiang Tiefeng said bluntly, “the future is not to acquire land for the purpose of acquiring land. I would rather not take it than take it wrong”. The land acquisition plan in 2022 will be optimized according to the market situation. On the whole, it is necessary to ensure the safety of the company’s cash flow and optimize the debt structure, which is a major prerequisite.
The reporter of Beijing business daily noted that although the sales level chose to seek “stability” and shouted the slogan that it would be better to take it rather than take it, the land market of China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) in the past year was particularly radical – in 2021, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) including bidding, auction and listing, collecting the land expenditure including residential nature and collecting the land cost and equity expenditure including residential projects totaled 81.94 billion yuan.
