Cash flow has not improved significantly, and market confidence is still insufficient. Although the mortgage interest rates in many places fell and some cities implemented policies due to the city, the average daily transaction volume of key cities in January decreased by 26% year-on-year, further expanding by 8 percentage points compared with that in December, and the cash flow at the operating end did not improve. From the credit side, although the overall policy has warmed up since September, due to concerns about the liquidity of the industry and some enterprises, the Chinese loans of real estate enterprises decreased by 31.6% year-on-year in December 2021, indicating that the cash flow at the financing side of real estate enterprises has not improved significantly.
The overall land market continues to be depressed, and the central state-owned enterprises are also relatively cautious in taking land. From the perspective of the third batch of centralized land supply, the overall premium rate is only 2%, the flow auction rate is 22%, the reserve price transaction accounts for 78%, and the local auction market is still depressed. From the perspective of the land acquisition and sales ratio of central state-owned enterprises, it is not more active due to the relatively good financing and financial situation. The land acquisition and sales area ratio of the top 50 central enterprises in 2021 is only 64%, and that in December is only 34%. The short-term market uncertainty also restricts the land acquisition willingness of some high-quality real estate enterprises.
The decline of real estate investment accelerated, and local financial pressure increased. In December 2021, the national real estate investment fell by 13.9% year-on-year in a single month, 9.6 percentage points higher than that in November. The short-term sales end has not stabilized, while land acquisition and construction will lag behind sales. Coupled with the high base in the first half of 2021, there is still great downward pressure on investment. In the first November of 2021, the national land use right transfer revenue increased by 3.8% year-on-year, and the growth rate narrowed by 12.1 percentage points compared with the whole year of 2020. Among them, the monthly land transfer revenue has continued to grow negatively since August 2021, and the downturn of the land market will gradually increase the local financial pressure.
The potential leverage space of central state-owned enterprises is limited, or they cannot hedge the contraction of private enterprises. In 2021, the sales area and land acquisition area of the top 50 real estate enterprises and central state-owned enterprises accounted for 30.5% and 46.7% respectively. In the first half of 2021, the asset liability ratio of the top 50 real estate enterprises excluding advance receipts reached 67.6% and 74.5% respectively, which has been at a high level. Even without considering the wishes of the central state-owned enterprises themselves, their potential leverage space may not be able to support them to undertake the task of M & A and hedge the contraction of the land acquisition end of private enterprises in the open market.
Confidence is restored. In order to break the current dilemma, the policy side still needs to strengthen its efforts. At present, the industry is still in a negative cycle of “downward sales – tightening of funds of real estate enterprises – Investment contraction / rating reduction or default – Loan reluctance of financial institutions – pessimistic expectations of home buyers – further downward sales”. In January, many real estate enterprises were downgraded again by international rating agencies. We believe that at present, the confidence of all subjects is still insufficient, and the cash flow of real estate enterprises has not improved significantly. In addition, the first quarter is the peak of US dollar debt maturity, and the liquidity of some real estate enterprises is still in existence. At the current time point, confidence reconstruction is still the key to breaking the current dilemma. In addition to actively revitalizing the assets at risk and self rescue, we also need to further strengthen the policy side to inject confidence into the market.
Investment suggestion: at the current time point, although the credit signal continues to warm up and many local governments have also issued relevant loose policies, the confidence of financial institutions and home buyers is still insufficient, and the overall cash flow of the industry has not improved significantly. Superimposed on the overseas debt maturity peak in the first quarter, the capital pressure of some private enterprises remains. We believe that the key to breaking the current dilemma still lies in the repair of industry confidence. In addition to actively revitalizing the assets at risk and self rescue, we also need to strengthen the policy side to inject confidence into the market. Investment suggestions: continue to pay attention to the valuation repair of the sector brought by the improvement of the policy side, the development sector pays attention to the leading real estate enterprises Poly Developments And Holdings Group Co.Ltd(600048) , Gemdale Corporation(600383) , China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) , China Vanke Co.Ltd(000002) with strong short-term pressure resistance and prominent medium and long-term competitive advantages, and moderately pay attention to the second-line elastic targets Jinke Property Group Co.Ltd(000656) , Seazen Holdings Co.Ltd(601155) , Jiangsu Zhongnan Construction Group Co.Ltd(000961) , Longguang group, etc. benefiting from the improvement of the policy. In terms of diversified business, the current valuation of the property management sector has reached a historical low, and the cost performance continues to highlight. We are optimistic about the property management leaders with outstanding comprehensive strength, such as country garden service, poly property, xinchengyue service, Jinke service, and commercial operators with strong asset light output strength, such as Xingsheng commerce.
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 de industrialization pressure of the real estate market exceeds expectations and the sales are greatly changed from price to quantity, it will bring some impairment risk of high price in the early stage. 3) Risk that the policy care is not as good as expected: if the effectiveness of the policy is insufficient and the adjustment range and time of the real estate market exceed expectations, it will have a negative impact on the development of the industry.
