The fundamentals have not warmed up, and the policy side has increased its efforts. Although the policy side has made efforts, the current industry fundamentals have not warmed up. The sales data is still at the worst level in history. Q1 sales of top 100 real estate enterprises decreased by 47.1% year-on-year; The cumulative sales area of houses in 300 cities decreased by – 45.5% year-on-year. The land market remains deserted. The land transaction and construction area of 300 city residential Q1 decreased by 63.9% year-on-year. The enterprises with the highest new value in Q1 are mainly state-owned enterprises, with obvious land acquisition advantages. The overall financing is still not optimistic. The total bond financing amount in Q1 decreased by 44% year-on-year. Policy relaxation on the demand side has sprung up everywhere, covering the third and fourth tier cities to the second tier provincial capitals. We believe that under the current background of extremely poor fundamentals, policy relaxation is only the beginning, and the subsequent policy relaxation is expected to continue to increase.
Understand the decline and rebirth of real estate stocks from two perspectives:
1) from the perspective of game theory, the policy direction determines the excess return. From the 16th to the first half of the 21st century, the overall prosperity of the industry was high, the policies were naturally strict, more lenient and less lenient, and the lack of speculation in real estate and housing was deeply rooted in the hearts of the people, so the real estate stocks should lose the market. From this perspective, the reason for this round of rise is obviously that the fundamentals have gone down more than expected, breaking through the lower limit of the box, the real estate fundamentals have lost their previous toughness, and there has been a deterministic shift in the policy tone.
2) from the perspective of value, the change direction of profit margin and leverage ratio determines the valuation direction. Since 16 years, the continuous downward killing of real estate stock valuation has been rooted in the excessive financialization under the fast turnover mode. The real leverage of real estate enterprises is invisible, which leads to the increase of real leverage and the aggravation of industry internal volume, resulting in the decline of land acquisition profit margin. From this perspective, the reason for this round of rise is the exit of the fast turnover model, the improvement of the model has led to the increase of land acquisition profit and the decline of real leverage, and the reasons for valuation repair appear.
Interpretation of real estate stock market from two perspectives:
1) Game Perspective: no more assumptions are needed. The core condition is that the land market will not warm again, the land is not hot and the market is not cold. State owned enterprises with low Pb market value and private enterprises with marginal improvement are the best choice. We expect this to be the main perspective in the second quarter.
2) value perspective: the space is larger, but there are a little more assumptions, so we need to wait. In the “slow era”, the change of business model is more important than the change of short-term market share. The new model brings a new cycle, and the current real estate stocks are standing at the starting point of the new cycle. After the valuation difference within the sector is reduced, the slow week transformation real estate enterprises with the willingness and ability to increase leverage are expected to usher in valuation remodeling.
Investment suggestion: the land is not hot and the market is not cold. Level Pb and rise the leader again. From the perspective of game, it is suggested to pay attention to relatively safe private enterprises and small and medium-sized state-owned enterprises, and take Pb less than 1 as the most direct standard. We need to pay close attention to the land heat. The land is not hot and the market is not cold. From the perspective of value, the improvement of layout mode needs to wait for the narrowing of Pb difference. The “rising tide” brings the second round of rise. It is preferred to select high-quality leading real estate enterprises with “slow turnover”, willingness to increase leverage and ability. It is suggested to pay attention to Poly Developments And Holdings Group Co.Ltd(600048) , Gemdale Corporation(600383) , Longhu group.
Risk tip: the downward trend of industry fundamentals is higher than expected, while the policy intensity is lower than expected, and the improvement progress of industry structure is lower than expected.
