\u3000\u3000 China Vanke Co.Ltd(000002) China Vanke Co.Ltd(000002) )
Key investment points
The decline of profit margin will drag down the current performance, and the impairment provision is expected to slow down the profit pressure
In 2021, the company’s performance was lower than expected. The annual operating revenue was 452.8 billion yuan (YoY + 8.0%), and the net profit attributable to the parent company was 22.52 billion yuan (yoy-45.7%); The gross profit margin and net profit margin attributable to the parent company were 21.8% and 5.0% respectively, down 7.4 and 5.0 percentage points compared with the same period last year.
We believe that the decline of the company’s net profit is mainly due to the decline of gross profit margin of development business, the decline of investment income and the provision of asset impairment loss, which is the embodiment of historical factors in the statements. With the continuous growth of sales and the provision of inventory impairment under the principle of prudence, the settlement performance is expected to hit the bottom and rebound.
The project has sufficient reserves and strong support for future performance
By the end of 2021, within the scope of consolidation of the company, the area of sold and outstanding projects was 46.735 million m3, with a corresponding amount of 71.8 billion yuan, which was 1.6 times of the operating revenue of the current year and 1.7 times in 2020, stable at a high level. In 2021, the average price of sold and unsettled projects was 15209 yuan / m2 (YoY + 7.2%), which was 1.18 times of the average settlement price of the current period. With the successive delivery of high average price projects, the company’s settlement profit margin is expected to stabilize and recover.
Diversified businesses have developed rapidly, forming a new reservoir of profits
In 2021, the company achieved operating revenue of 24.04 billion yuan, 3.16 billion yuan, 2.89 billion yuan and 7.62 billion yuan respectively in the cloud of everything, logistics business, rental housing and commercial business, with year-on-year growth of 32.1%, 68.9%, 13.9% and 20.6% respectively. The diversified business of the company is leading in the industry, and all sectors rank high in the fine molecule industry. Since 2014, the company has diversified the layout of the real estate industry chain, and has successively completed the transition from the investment period to the mature period. We believe that the diversified business layout of the company’s mature operation in the next three years will continue to drive the contribution of recurring business income and profit. At the same time, in the accelerated process of REITs pilot, the exit path of held properties is expected to continue to broaden, contributing to the additional growth of performance.
The three red lines remain green, and the financing cost remains low
The debt structure of the company continued to improve, with the asset liability ratio of 68.4%, the cash short debt ratio of 1.5 and the net debt ratio of 29.7%, which remained at the green level. Thanks to the high credit rating given to the company by several rating agencies, the company’s comprehensive financing cost for the whole year was only 4.11%, maintained at a low level.
The steady financial level reflects the company’s consistent and steady business style. In the process of optimizing the current centralized land transfer system, a safe financial structure is conducive to the company to seize the land acquisition opportunity and improve the soil storage structure. The company proposed that since this year, the land investment has changed from distributed control to centralized control, and the requirements for land investment have been improved. We believe that under such changes, the quality and scale of the company’s land acquisition projects are expected to continue to improve.
Investment suggestion: we believe that the decline of the company’s 2021 performance is the reflection of the historical factors of the rise of land costs and the decline of the real estate market in the past three years. At the same time, the more prudent provision for inventory impairment in the early stage can alleviate the downward pressure on future profit margins.
Due to the slowdown of sales scale in the early stage and the downward pressure on profit margin caused by the rise of land prices, we lowered the company’s profit forecast from 2022 to 2023. We expect that from 2022 to 2024, the company will realize operating revenues of 497.2 billion, 558.5 billion and 621.6 billion (485.9 billion and 558.4 billion before 2022 and 2023), with a year-on-year increase of 10%, 12% and 11%, and net profits attributable to the parent company of 24.6 billion, 26.6 billion and 29.4 billion (48 billion and 55.1 billion before 2022 and 2023), with a year-on-year increase of 9%, 8% and 11% respectively. At present, the local auction market has improved, and the company has strong land acquisition ability; In addition, the company’s measures such as equity repurchase and executive holdings increase are conducive to maintaining market confidence. The current share price of the company corresponds to 9.9 times of PE in 2022, maintaining the “buy” rating.
Risk warning: the tightening of regulation and control policies exceeds expectations, the change of double centralized transfer rules, the lag or delay of quoted data.
