Compared with previous years, a number of real estate enterprises reported “dystocia” in 2021. From the published financial reports of real estate enterprises, it is not difficult to see that the industry is undergoing substantive changes.
According to the incomplete statistics of the comprehensive data of the financial Associated Press, up to now, about 30 A-share listed real estate enterprises have disclosed the financial reports of 2021, while more than 80 H-share listed real estate enterprises have disclosed the financial reports of 2021. Among them, there are more than 60 A + H shares, and the net profit of real estate enterprises has declined year-on-year.
“There are some common characteristics of enterprises that have issued annual reports. First, the sales growth rate has slowed down significantly. Most real estate enterprises have a growth rate of less than 10%, and some real estate enterprises have even negative growth. Almost 80% of real estate enterprises can not meet the sales target set at the beginning of the year.” Xiao Wenxiao, a senior analyst at Tongce Research Institute, said.
Xiao Wenxiao also said that judging from the performance data of internal housing stocks in the annual report, the overall profitability of real estate enterprises continued to decline, with an average gross profit margin of 24.5%, down 3.7 percentage points year-on-year; The operating revenue increased by 16%, but the net profit decreased by 26%, and the phenomenon of “increasing income without increasing profit” was obvious.
various factors caused the decline of net profit of real estate enterprises
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H shares have disclosed the performance of real estate enterprises in 2021. The net profit data of about 50 real estate enterprises fell year-on-year, of which the net profit of more than 10 real estate enterprises was negative, that is, they were in a state of loss.
Analysts pointed out that since the second half of 2021, the market has suddenly cooled down. In order to realize rapid de capitalization and rapid return of funds, real estate enterprises have adopted various price reduction and promotion means, so it is difficult to guarantee the overall profit of the project.
“The gross profit margin of carry over projects is lower than that in the early stage, so the profit situation of real estate enterprises is generally not ideal; enterprises with business-oriented business are poor in the operation of cultural tourism industry and commercial projects affected by the epidemic.” Yihan think tank analysts said.
Haitong Securities Company Limited(600837) real estate analyst Yang Fan told reporters that there are many reasons for the decline in the net profit of real estate enterprises, among which the decline in gross profit margin and provision for impairment have the greatest impact on the net profit.
It is worth mentioning that the different accounting standards adopted by various real estate enterprises will also affect the final presentation of their net profit data. For example, Vanke adopts the cost method as the accounting standard, while other real estate enterprises adopt the valuation method.
Data show that in 2021, Vanke Group’s net profit attributable to shareholders of listed companies was 22.5 billion yuan, a year-on-year decrease of 45.7%.
At the 2021 annual performance meeting of Vanke, some investors believed that Vanke’s adoption of cost method would lead to overly conservative profits, and asked Vanke whether it would consider converting cost method into fair value measurement method in the future.
In this regard, Han Huihua, CFO of Vanke Group, said, “Using the cost method will have a certain impact on Vanke’s rate and gross profit margin, and the valuation can not be reflected dynamically. The discount on net profit is relatively large, but when the industry cycle changes, using the valuation method is easy to cause fluctuations in the accounting statements. In this case, we prefer a more robust method in the selection of accounting policies, which is also the consideration of our long-term adherence to the cost method.”
However, another analysis pointed out that if the enterprise asset price rises, the cost method will make the presentation of profit more conservative, but if the asset price falls, the reflection of profit by valuation method is more objective.
the era of high gross margin is gone
In the future, the gross profit margin of the real estate industry will gradually return to a reasonable range, which has gradually become an industry consensus.
“Real estate enterprises have taken a series of actions and measures to slow down the decline of profits, so there is fine management, organizational structure adjustment and so on, so as to maximize the compression of any possible costs and expenses and leave as much profit space as possible.” Yang Fan said.
Yang Fan also believes that even if the profit performance of real estate enterprises is improved, the high profit situation in the early years can no longer be sustained, and it will be the general trend to approach the profit level of the manufacturing industry.
Seazen Holdings Co.Ltd(601155) chairman Wang Xiaosong also believed at the 2021 annual performance meeting that real estate will return to the attribute of manufacturing industry from similar financial industry.
On the issue of gross profit margin, Chen Weijian, executive director, vice president and chief financial officer of Zhengrong real estate, publicly said that the golden age of real estate has passed. In the case of limited land price and house price, the space for land appreciation is very small, which will undoubtedly have an impact on the gross profit margin.
The management of China Resources Land said at the 2021 performance meeting that it is a consensus that the gross profit margin of the industry will return to about 20%. “The main reason is that the gross profit margin will decline due to the high land price in 2017 and 2018. Under macro-control, the industry will not return to the high gross profit era of the past 30% in the future.” Zhu Jiusheng, President of Vanke Group, said that the gross profit margin of Vanke’s future development can be maintained at 20%.
For the industry changes brought about by the correction of gross profit margin, Xiao Wenxiao believes that this means that the development model of the real estate industry needs to be transformed. In this process, there is bound to be a painful period. Enterprises need to adapt to market changes and innovate development models.
