Asset light agency construction has broad prospects, high growth & high profit & anti cycle: China's agency construction originated from government agency construction. In recent years, commercial agency construction has developed with the expansion of the real estate industry. At present, it has developed into a "three legged coexistence" of government agency construction, commercial agency construction and capital agency construction. The overall scale of the agent construction industry is small, but it develops rapidly and has growth potential. According to the data of the Chinese Academy of Sciences, the compound annual growth rate of the number of new contract projects and construction area in a single year in China's real estate agent construction market from 2010 to 2020 exceeded 24%. It is expected that the potential market area of China's agent construction will increase to 910 million square meters in 2025. Different from the traditional development mode, the agent construction business has the characteristics of light assets, high profitability and anti periodicity. Under the trend of reducing leverage and transforming "management dividend" in the industry, it can resist risks and thicken profits, which is one of the business tracks for real estate enterprises to rush to the beach one after another.
The business development of green city management Zhongyuan construction industry has its own advantages: green city management is backed by green city China and has achieved a nationwide layout. By the end of 2021, the cumulative contract scale has exceeded 84.7 million square meters, making it a pioneer in the industry; Zhongyuan Jianye relies on Jianye real estate to deeply cultivate Henan Province, with a cumulative contract scale of 30.97 million square meters; In terms of profitability, the net profit margin of Zhongyuan construction industry has remained at about 60% in recent years, which is much higher than the net profit margin of about 20-25% of Greentown management. We believe that the obvious differentiation of profit scale between the two is mainly due to the different business structure and operation mode. In terms of business model, green city management adopts "self operation + cooperative agent construction", while Zhongyuan construction industry only focuses on self operation, which is a drag on the profit margin because the cooperative projects need to pay additional service fees for partners; In addition, unlike Zhongyuan construction industry, which only focuses on commercial agent construction, green city management business covers commercial agent construction, government agent construction, etc. compared with commercial agent construction, government agent construction usually does not involve premium service fees, and the profit margin is not as good as commercial agent construction. Although the profit margin of Greentown China has been reduced, the cooperative agent construction and rich customer sources have also brought more expansion opportunities to Greentown China.
There is no lack of growth driving force for agent construction. Build an industrial chain service moat in the medium and long term: at present, the three modes of agent construction industry have growth driving force. In terms of commercial agent construction, the market share of the top 100 real estate enterprises in 2021 was only 47.2%, and it is common for urban investment to support the bottom of centralized land supply. Small and medium-sized real estate enterprises and urban investment with weak product power are potential expansion objects of agent construction, which will help to improve their product competitiveness and financing and sales performance of specific projects. In terms of government agency construction, urban renewal and affordable housing encouraged by policies are also expected to bring agency construction stock and incremental expansion of the market. In the field of capital agency construction, with the participation of financial institutions in accident and asset disposal of high-pressure real estate enterprises, agency construction enterprises can combine their professional advantages with the financial advantages of financial institutions to achieve a win-win situation. In the medium and long term, we believe that with the continuation of this round of adjustment period, real estate enterprises may tend to intervene in the asset light agent construction market out of consideration of risk control and diversified business structure; In addition to intensifying industry competition, it is also expected to promote leading enterprises to improve their comprehensive strength and derive derivative businesses to form an industrial chain moat.
Investment suggestion: this round of real estate market adjustment has exposed the capital side risks brought by the traditional high leverage business model. Real estate enterprises have explored new development models and transformed to diversification. Asset light agent construction business is expected to be favored under the trend of industry refinement. On the whole, the asset light mode of agent construction business has the characteristics of high profitability, can resist cyclical fluctuations in the downward period of the industry, and improve the competitiveness and popularity of products. It has great potential under the background of the current survival pressure of small and medium-sized real estate enterprises and the weak development ability of Urban Investment Trust Land and financial institutions involved in the asset disposal of real estate enterprises. In addition, urban renewal and affordable housing supported by policies are also expected to bring stock and incremental expansion space for agent construction business, It is suggested to pay attention to green city management holding, a national industry leader with first mover and brand advantages, as well as Zhongyuan construction industry in the Central Plains.
Risk tips: 1) the new land storage of real estate enterprises is less than expected: if the pressure on the capital side of real estate enterprises increases, the overall land acquisition strength of real estate enterprises decreases, and the contracted construction area of agent construction companies will be dragged down.
2) pressure on Government Finance: with the cold weather in local cities, the government is forced to reduce constructive expenditure by "land finance", and the expansion of government agency construction business by agency construction enterprises is blocked. 3) The risk that the policy care is not as good as expected: if the effectiveness of the policy is insufficient, the adjustment range and time of the real estate market exceed the expectation, and the agent construction enterprises will be affected.
