Key points of the report: in this report, we focus on answering the following questions: 1) from the perspective of supply side, combined with the business logic of enterprises, to explain the changes in the real estate market and enterprises in the past four years. 2) Under the framework of supply side research, how do we judge the policy of the industry and the deductive direction of the market. 3) From the change of external environment to the change of enterprise operation, will the leading real estate enterprises stand out from the homogeneous industry, and will the head real estate stocks become the leader of the industry α。
Why should real estate research start from the supply side?
Enterprise side: in the market before 2018, the core that dominates the prosperity of the real estate market is demand. After 2018, the continuously tightened regulation policy and regulation ideas different from the past have changed the business strategy of real estate developers, gradually shifting from land hoarding strategy to fast turnover strategy.
Industry side: the core difference of this round of real estate lies in insufficient supply. Regions with a national sales area accounting for more than 80% have a decontamination cycle of less than 1.5 years, and are old and invalid inventory that is difficult to decontaminate. The premise of this round of market recovery is that the supply of the core region precedes the recovery of demand. The key factor is not policy, but the elasticity of supply.
How to judge the direction of policy and fundamentals?
Two anchors of real estate regulation policy direction: 1) growth perspective: the contribution of real estate development behavior to upstream and downstream entities of the industrial chain; 2) From the perspective of people’s Livelihood: real estate prices are relatively stable.
In this round of real estate cycle, high completion and low commencement form a drag on the construction area, further affecting the prosperity of the upstream and downstream industrial chain entities. Under the increasing liquidity pressure of enterprises, they continue to reduce prices, promote sales and sell assets, impacting the expectation of house purchase. From the two dimensions of growth and people’s livelihood, policies should continue to be countercyclical loose.
At the fundamental level, the marginal improvement of some head real estate enterprises in March. High quality real estate enterprises that have maintained land acquisition intensity in the past year still have strong supply capacity and show signs of an earlier recovery in sales scale. We believe that the improvement of real estate sales will continue to be transmitted from the supply side to the demand side, and the market recovery needs only time.
Can leading real estate enterprises become the industry α Subject matter?
At present, the real estate industry is in the stage of substantive liquidation. Although there is no large-scale bankruptcy liquidation process for the housing enterprises in danger, the risk enterprises have been substantially cleared from the land market competition.
From the perspective of pb-roe, under the background of clearing out the risky real estate enterprises, the certainty of sustainable operation of the leading real estate enterprises has been greatly enhanced. Under the regulatory framework of the three red lines, we have built the roe central measurement framework of real estate enterprises. When the regulatory requirements are met, the roe center of real estate enterprises is expected to be about 16.7%, and the corresponding reasonable center of Pb valuation is 1.01 times. At present, when the Pb valuation of Wande all a index is about 1.73 times, the Pb valuation center of corresponding leading enterprises is about 1.73 times.
Investment advice
In conclusion, from industry to enterprise, under the background of structural recovery on the demand side, continuous relaxation of regulatory policies under the downward trend of total sales, and continuous improvement of land market competition pattern and profit quality, leading real estate stocks are expected to usher in continuous improvement of operation quality under the regulatory framework, and roe is expected to stabilize and recover in the process of continuous liquidation of the industry.
Three core main lines are recommended: 1) the downward pressure on performance in the past 21 years has been fully released, the land investment control has been optimized, has the strongest potential land acquisition ability, and corresponds to the stagflation leader with the strongest sales elasticity and business quality improvement space: China Vanke Co.Ltd(000002) ; 2) The liquidation of venture private enterprises will benefit from the continuous improvement of the competition pattern to the greatest extent: Poly Developments And Holdings Group Co.Ltd(600048) , green city China; 3) Leaders of high rated and stable private enterprises: Xuhui holding group, Hangzhou Binjiang Real Estate Group Co.Ltd(002244) .
Risk warning event: the tightening of financing environment exceeds expectations; The epidemic continues to impact real estate sales; Changes in land market transfer rules; Changes in real estate sales policies; Changes in real estate regulation policies; Cited data lag or not in time
