Ping An View:
The growth of revenue slowed down and the scale of profit shrank: impacted by the decline of industry prosperity, the bottom of gross profit margin, impairment provision and the increase of minority shareholders’ profits and losses, the overall revenue of A-share listed real estate enterprises increased by 8.6% year-on-year in 2021, the growth rate decreased by 2.3pct year-on-year, the net profit attributable to the parent decreased by 78.4% year-on-year, and the growth rate decreased by 62.5pct year-on-year. Among the 121 listed real estate enterprises, 29 are facing losses, an increase of 7 compared with 2020; The total loss was about 100.29 billion yuan, a year-on-year increase of 194.4%. At the end of 2021, the balance of contract liabilities of listed real estate enterprises was 3.5 trillion yuan, with a year-on-year increase of 7.1%, and the degree of performance guarantee was 117.7%. Sufficient advance revenue provides a deterministic guarantee for revenue growth. However, due to the impact of high land price since 2017, new house price limit policy and price reduction and promotion since 2021h2, it is expected that the downward pressure on settlement gross profit margin will remain, which will continue to have a negative impact on the profit side.
The gross profit margin accelerated to the bottom, and the financial and sales expense rate rose: affected by the price limit of new houses, high land prices and rising building materials costs, the gross profit margin of listed real estate enterprises in 2021 was 20.6% and the net profit margin was 3%, which was 6.2 and 6.4pct lower than that in 2020. Although the gross profit margin of land acquisition by real estate enterprises has improved since the second batch of land supply in 2021, it is reflected that it will still take time at the settlement end, and the short-term gross profit margin will continue to bottom out. In terms of cost rate, credit events of real estate enterprises have occurred frequently since 2021h2. Except for the smooth financing of a few central state-owned enterprises and high-quality private enterprises, the financing of most real estate enterprises has been blocked to varying degrees. The financial cost rate increased by 0.5pct to 2.8% year-on-year in 2021; Affected by the decline of sales boom, real estate enterprises rely more on channel distribution to speed up the elimination of projects. The sales expense rate increased by 0.2pct to 2.9% year-on-year, driving the overall expense rate to increase by 0.8pct to 9.2% year-on-year.
The sales boom has not stabilized, and the intensive disposal of assets and inventory reduction: in 2021, the cash received by listed real estate enterprises from selling goods and providing labor services was 3.3 trillion yuan, a year-on-year increase of 6.3%. However, due to the sharp decline in sales boom since 2021h2, the year-on-year growth rate has narrowed by 30.9pct compared with 2021h1. Although the policy has warmed up since September 2021 and the local real estate market policies have entered the stage of substantial improvement, in April 2022, the monthly sales of the top 100 real estate enterprises decreased by about 60% year-on-year, and the sales boom has not stabilized. The follow-up needs to be strengthened by the “real estate stabilization” policy, and the second quarter may be an important observation window. Under the pressure from the capital side, real estate enterprises contracted land acquisition and accelerated the removal of existing soil storage. The overall inventory growth of the sector slowed down. The overall inventory of the sector reached 7.2 trillion yuan in 2021, a year-on-year increase of 1.8%, and the growth rate narrowed by 9.3pct compared with 2020; At the same time, some insurance and high-pressure real estate enterprises actively sold off their assets and transferred the equity of cooperation projects. The asset disposal income of A-share listed real estate enterprises increased by 207.1% year-on-year.
The capital side of real estate enterprises was under pressure and started the cash flow Defense War: in 2021, the cash short debt ratio of A-share listed real estate enterprises was 103.6%, the asset liability ratio after excluding contract liabilities was 72.4%, and the net debt ratio was 74.4%. Except that the asset liability ratio after excluding contract liabilities slightly exceeded the red line of 70%, the other two indicators met the standard. In 2021, there were 49 listed real estate enterprises in the green range, the same as the previous year. However, at the end of the period, the total cash on hand of listed real estate enterprises was 1.2 trillion yuan, a year-on-year decrease of 12.2%, and the total cash on hand was the lowest in recent four years. With the tightening of the financing environment and the increasing downward pressure on sales, credit events of some real estate enterprises are superimposed frequently, and strengthening financial security and ensuring cash flow are the current focus of the real estate enterprises.
Investment suggestion: impacted by the downturn of the industry, the bottom of gross profit margin and the impairment of annual report, the net profit of the industry shrank significantly in 2021, continued the phenomenon of “increasing income without increasing profit”, and the cash in hand of real estate enterprises decreased significantly, starting the cash flow defense war. At present, in the context of steady growth, local finance and property market transactions are under pressure, and there is great pressure on the volume and price adjustment of the property market. It is urgent to resolve industry risks and stabilize market expectations. The policy has entered the stage of substantial improvement. It is expected to increase efforts at both ends of supply and demand in the future to drive the continuous repair of sector valuation. Two types of investment opportunities are mainly grasped in the development. One is the strong operating and high credit enterprises with relaxed short-term benefit policies and improved gross profit margin at the land acquisition end, which are expected to seize market share in the medium and long term, such as Poly Developments And Holdings Group Co.Ltd(600048) , China Vanke Co.Ltd(000002) , Gemdale Corporation(600383) , China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) , Shenzhen Tagen Group Co.Ltd(000090) , Hangzhou Binjiang Real Estate Group Co.Ltd(002244) , etc; One is the subject matter with large adjustment in the early stage, certain support in fundamentals and greater flexibility in policy game, such as Seazen Holdings Co.Ltd(601155) , Jiangsu Zhongnan Construction Group Co.Ltd(000961) , Jinke Property Group Co.Ltd(000656) , etc. At the same time, the current mainstream material enterprises only have 20 times PE in 2022, and still set a growth target of 25-50% in the next few years. It is suggested to pay attention to country garden services, poly property, China Merchants Property Operation & Service Co.Ltd(001914) , Jinke services, xinchengyue services, Xingsheng commerce, etc.
Risk tips: 1) reduce the risk of supply adequacy: if the local city continues to be cold and the new land storage scale of real estate enterprises is insufficient, it will have a negative impact on the subsequent supply of goods, and then affect the sales, commencement, investment and completion of the industry. 2) Large scale impairment risk of real estate enterprises: if the decontamination pressure of the real estate market exceeds the expectation and the sales are greatly changed from price to quantity, it will bring significant impairment risk of some high prices in the early stage. 3) Policy care is less than expected risk.
