Up to now, many of the major real estate enterprises that have successively released their annual reports are representatives of the steady development of the industry, but they have not escaped the fate of the decline of gross profit margin.
According to the incomplete statistics of the first financial reporter, including the unaudited performance report, up to now, a total of about 30 large-scale real estate enterprises have disclosed the operating conditions in 2021. Except Yuzhou and Liguo, the gross profit margin of the other 28 listed real estate enterprises has decreased to varying degrees. Among the top 10 real estate enterprises that have disclosed the annual report, the gross profit margin of CNOOC real estate and Vanke has decreased by more than 6 percentage points; The gross profit margin of 14 real estate enterprises was less than 20%, and Greentown also fell 5.5 percentage points to less than 20%.
The industry generally attributed the decline in gross profit margin to the double squeeze caused by the previous carry forward of high prices and the superposition of new house price limits. This situation is expected to be repaired with the gradual rationality of the land market. The management of many real estate enterprises mentioned that the plots obtained in the land market in the second half of 2021 have a better profit space.
However, can this repair process bring real estate enterprises back to the height of the past? Li Xin, President of China Resources Land, said, “everyone has a consensus on the return of the gross profit margin to about 20% or more”, “the situation of each company is different, but the goal of the gross profit margin level is not much different, and it is unlikely to return to a gross profit margin of 30% or more.”
half of the gross profit margin of real estate enterprises decreased to 20% below
According to the incomplete statistics of the first financial reporter, including the unaudited performance report, up to now, about 30 large-scale real estate enterprises have disclosed the operating conditions in 2021, and 28 listed real estate enterprises have experienced varying degrees of decline in gross profit margin.
Previously, Yihan think tank statistics showed that in the middle of 2021, the average gross profit margin of 50 typical real estate enterprises covered by it was about 23.2%. Up to now, 20 real estate enterprises are lower than the index, and the overall profitability has further declined; Among them, 14 have been less than 20%, accounting for nearly 50%.
Specifically, among the top 10 real estate enterprises that have published the annual report, including country garden, Vanke, CNOOC real estate, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) , China Resources Land and Longhu group, the gross profit margin is declining.
Among them, compared with the same period in 2020, Vanke’s gross profit margin decreased the most, from 29.2% of the previous year to 21.8%, a decrease of 7.4 percentage points. A number of securities companies said that the decline was “beyond expectations”. CNOOC real estate, known as the “king of profits”, ranked second in the decline of this index. The gross profit margin decreased by 6.5 percentage points from 30% in 2020 to around 23.5%, while the net profit margin decreased by more than 7 percentage points to 17.78%
The gross profit margin of China Resources Land and Longhu decreased relatively slightly, both at about 4%, 27% and 25.3% respectively; Both companies are supported by relatively mature and profitable investment property operations. During the reporting period, the gross profit margin of the investment properties of the two companies was as high as 68.2% and 74% respectively, while the gross profit margin of the development properties actually fell to about 23%.
In addition, the gross profit margin of 14 real estate enterprises is below 20%, of which 9 fell below the level of 20% in 2021. Greentown fell more than 5 percentage points from nearly 24% to 18.1%. It is worth mentioning that although the gross profit margin of Seazen Holdings Co.Ltd(601155) as a whole remains at 20.4%, the gross profit margin of its real estate development business is about 4 percentage points lower than that of the previous year, which has also fallen to 17.7%.
In fact, after the gross profit margin of real estate enterprises reached a phased high in 2018, it entered the downward channel and has not started the return process so far Sinolink Securities Co.Ltd(600109) data show that from 2018 to 2020, the gross profit margins of real estate enterprises were 28.77%, 26.96% and 23.35% respectively, with a year-on-year decline.
According to the statistics of Yihan think tank, among the 50 typical real estate enterprises tracked by Yihan think tank, the gross profit margin of 33 real estate enterprises was concentrated between 25% – 35% in 2019 and about 31 real estate enterprises were concentrated between 20% – 30% in 2020.
For the decline of gross profit margin, the industry has obvious prediction and consensus Seazen Holdings Co.Ltd(601155) chairman Wang Xiaosong said again at the recent performance meeting that the real estate industry would return to the attribute of manufacturing industry from the financial industry.
According to Sinolink Securities Co.Ltd(600109) statistics, the performance announcement of 2021 issued by real estate enterprises since March shows that the average gross profit margin is 18.74% and the average net profit margin is 8.21%; The gross profit margin of manufacturing industry in 2021 is 20.53%, and the net profit margin is 7.96%.
high land price control
The reason for the continuous decline of gross profit margin is that the booming industry has encountered a heavy hammer of regulation.
Since 2015, the accelerated rise of house prices led by first tier cities has started, the land market has been detonated simultaneously, and the investment of real estate enterprises has increased greatly. In 2016, the premium rate of local auction in first tier cities exceeded 100% for several consecutive months, and “land kings” appeared frequently. According to the data, there were more than 350 “land kings” in 2016.
The heat of the land market quickly pushed up the floor price. According to the Research Report of Guosheng securities, in 2016, the average floor price of China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) new soil storage was about 13000 yuan / m2, which was the peak in recent years. Synchronized with the popularity of prefectures and cities is the new house price limit orders successively issued by various regions. Many cities have restricted the increase of the record price of new houses. Since then, the “housing without speculation” was officially put forward in 2018, and the industry regulation has been under high pressure for a long time.
As a result, the land acquired at a high price coincided with the promotion of the price limit policy when entering the market. The project was difficult to reach the corresponding price as expected by the real estate enterprises, and the profit space was severely squeezed Dongxing Securities Corporation Limited(601198) research report shows that after the first quarter of 2016, the industry’s land to goods ratio reached 40%, which rose rapidly and remained at a high level. It once exceeded 60% in 2018, which also corresponds to the continuous decline of the industry’s settlement gross profit margin after 2018.
This is also the same reply of executives of real estate enterprises when asked about the decline of gross profit margin. Chen Xuping, CEO of Longhu group, said that the gross profit of real estate has decreased in the past few years, mainly due to the relatively hot land market in the first half of 20172018, and now these projects have entered the settlement channel one after another.
For Vanke, whose net profit fell by more than 45%, Yu Liang mentioned that in recent years, the fierce competition in the land market has had a significant impact on the gross profit margin level of the industry. Although the company realized earlier in the industry that the high-speed growth will eventually end, it failed to resolutely get rid of the inertia of high growth. “When the pursuit of scale is still popular and the competition for land is becoming more and more intense, the investment in some cities is chasing high and rash, the judgment of the market is too optimistic, and the investment expectation of some projects has not been realized, resulting in the decline of gross profit margin.
”
In addition, since the second half of 2021, the credit crisis of some real estate enterprises has led to a sharp tightening of industry financing channels, superimposed on the cold decline in the sales market. Many real estate enterprises have opened the mode of price reduction and promotion in order to accelerate payment collection and increase liquidity, which has compressed the profit space again.
“Since the second half of last year, the whole market has been cold rapidly. For the company, it must be the first priority to live safely.” Wang Xiaosong admitted at the performance meeting a few days ago that since the national day last year, Xincheng has successively given certain discounts to some projects under pressure or customers with a high proportion of down payment. In the fourth quarter, the monthly sales were more than 20 billion. While the cash flow level was rapidly recovered, the average sales price and profit margin were also affected accordingly.
For R & F, which has entered the deleveraging stage in 2019, price reduction and promotion is an important means to accelerate sales and promote capital return in recent years. The average selling price fell from more than 10000 yuan in 2018 to 8600 yuan / m2 in 2020, and the gross profit margin fell from 36.4% at that time to 25.2% in 2020. In 2021, with the further increase of liquidity pressure, it continued to reduce prices and promote sales in order to “maintain liquidity in the short term rather than focus on profitability”, and its gross profit margin decreased to 14.1%.
However, according to Xiao Yunxiang, a senior analyst at Tongce Research Institute, measures such as price reduction and promotion for rapid return of funds will reduce the gross profit margin in the short term, but in the long run, if there is no major change in the industry, the gross profit margin will maintain a relatively stable range for a long time after a slight return.
repair or after the industry is stable
Recently, the dawn of the industry’s gross profit margin restoration has begun to appear. In the second half of 2021, real estate enterprises were subject to liquidity pressure and suspended the pace of land acquisition. At the same time, under the pressure of land finance, local governments increased the investment of high-quality soil storage, and the third batch of centralized land supply in many cities in 2021 reduced the threshold of land auction. With the reduction of competitors and the release of high-quality land, the profit level of land acquisition real estate enterprises can be expected naturally.
Zhang Zhichao, chief executive of CNOOC real estate, said that about 50% of the plots obtained in the second half of 2021 were obtained at the base price or very low premium price, and the rate of return of many projects was very ideal.
“In the second half of last year, Shenzhen achieved 4 cases, Guangzhou 3 cases and Nanjing 3 cases. In these core cities, the scale and quality of investment in the second half of last year were very high. Compared with this year’s sales, including this year’s sales, it put forward the goal of steady growth and formed a good support for future profits.” Zhang Zhichao said.
Longhu also obtained “safer and cheaper” land during this period. According to the management of Longhu, after September last year, in the more than 30 core cities in its layout, many plots were obtained at the base price, and under the policy of centralized land supply, “the plot premium rate is capped at 10% ~ 15%, which can ensure that developers have better profits.”
It is worth mentioning that the regulation in the past few years has completely changed the expectations of real estate enterprises for investment and land acquisition.
“In the past, this industry was generally rising. The land price was raised, and it also rose back in two years. It is a long-term rising process.” The management of Longhu group said, “but after last July, there will be no such long cycle in the future. In the past, it can rise anyway, but in the future, once you get the wrong land, it is really possible that you can’t sell it or make a substantial loss.”
Therefore, when talking about the land acquisition strategy in 2021, Chen Xuping said that we should focus on the bottom line indicators such as gross profit margin and net interest rate, live within our means, obtain rationally, and always adhere to the investment principle.
Lin Zhong, chairman of Xuhui’s board of directors, also said that the first requirement of Xuhui’s investment discipline is to obtain land for profit, not to support the team and scale.
In the second half of 2021, Vanke also changed its land acquisition mode. “We have raised the investment requirements, such as the requirements for the profitability of investment projects, the requirements for the ability of the trading team and the requirements for post investment management,” Yu Liang said
For when the gross profit margin is expected to usher in growth and repair, each family also has different plans. Yang Xin, CFO of Xuhui, said, “we hope to have a relatively stable profit performance in 2022 and 2023, and we hope to resume growth in 2023.” Vanke said that the gross profit margin of the development business will remain at 20% in the next two years.
The management of country garden put forward a more cautious view, saying that the whole industry is now in the stage of adjustment and liquidation, and some enterprises with high liquidity pressure are also making large sales of assets. The gross profit margin will not rise again until the liquidation process is close to the end, or after the liquidation, the industry enters a relatively stable state. Before that, the gross profit margin may remain in a relatively low state.
Yu Xiaoyu, research director of Yihan think tank, believes that the current situation faced by real estate enterprises in 2021 is not ideal, whether on the land side, sales side or cost side. 2021 may become the bottom range of real estate enterprises’ profits. It is expected that this will be presented in 2023, that is, the annual report of enterprises in 2022, and then stabilize.
