(Economic Observation) The expansion of China's "700 billion yuan" real estate enterprises conveys the new trend of the three-building city

　　China News Service, Beijing, April 2nd. Title: China's "700 billion yuan" real estate expansion to convey the new trend of the three-building city

　　China News Agency reporter Pang Wuji

　　At the time of the intensive release season of housing companies' annual reports, the financial data and business trends of major companies form one of the best windows for observing the property market.

This year, what new industry trends have the leading real estate companies conveyed?

　　In 2020, Country Garden, Evergrande, and Vanke will still be the top three real estate companies selling houses in the Mainland.

Calculated on full-caliber sales, Country Garden’s contracted sales last year was approximately RMB 788.8 billion (calculated by multiple institutions), which was “the largest in scale” for four consecutive years; Evergrande ranked second, achieving contracted sales of 723.25 billion yuan; Vanke ranked third, with a contracted sales amount of 704.15 billion yuan.

Both Evergrande and Vanke entered the "700 billion yuan club" for the first time.

Debt reduction has become the focus of the industry

　　Under the requirements of the new regulations on financing management of real estate enterprises known as the "three red lines", major real estate enterprises will reduce debt as a key task in the next few years.

　　According to data from Vanke's annual report, as of the end of 2020, Vanke had a debt-to-asset ratio of 70.4% excluding advance receipts, a cash short-term loan ratio of 1.8 times, and a net debt ratio of 18.1%. Only the asset-liability ratio excluding advance receipts was slightly above the standard.

Han Huihua, the executive vice president and chief financial officer of Vanke, said that Vanke is confident that it will return to the "green gear" in the first quarter.

　　Xia Haijun, president of China Evergrande Group, said that since the end of March last year, Evergrande's interest-bearing liabilities have fallen sharply by 200 billion yuan.

At the same time, Evergrande also announced the goal of reducing debt in the next three years: on June 30, 2023, interest-bearing liabilities will fall below 350 billion yuan; on December 31, 2022, it will fully meet the regulatory requirements of the "three red lines".

　　Country Garden’s asset-liability ratio after excluding advance receipts in its 2020 annual indicators has improved.

According to statistics from the Shell Research Institute, Country Garden’s asset-liability ratio after excluding advance receipts was 80.5%, which was down by about 2.2 percentage points from the same period last year and still exceeded the threshold, continuing to maintain the “yellow profile” ranks.

Declining profitability

　　The profit margins of the three leading real estate companies fell last year.

　　According to statistics, the gross profit margin of Vanke's real estate business and related businesses in 2020 was 22.6%, a drop of 4.6 percentage points from the same period last year.

In the same period, Evergrande's gross profit margin was 24.2%, a decrease of 3.6 percentage points from the same period in 2019.

Country Garden's revenue and profits have experienced a year-on-year double decline that has not been seen in many years.

In 2020, Country Garden’s gross profit was approximately 100.91 billion yuan, a year-on-year decrease of approximately 20.3%; gross profit margin was 21.8%, a decrease of approximately 4.3 percentage points from the same period last year.

　　The decline in profitability of leading real estate companies reflects the overall situation of the industry to a certain extent.

In recent years, the profit rate of the real estate industry has shown signs of continued decline.

A previous report issued by the Zhongzhi Research Institute showed that due to the continuous real estate control policies and the high cost of various factors, the decline in the turnover rate of enterprises superimposed, the average net profit rate and the average return on net assets of the top 100 real estate companies in 2020 They were 11.1% and 15.9%, respectively, representing a year-on-year decrease of 0.4 and 0.8 percentage points.

　　Vanke President Zhu Jiusheng recently stated that the ratio of land prices to housing prices has increased significantly in the past few years, which will be reflected in future settlements.

In the short term, there is still a downward trend in real estate profitability.

Develop a second growth curve

　　With the peaking of the new housing development business and the decline in industry profitability, the development of the second growth curve has become the consensus of the industry. This is also an important reason why real estate companies have been keen to "do sideline business" in the past two years.

　　In 2020, the three giants of Bihengwan will have a layout in this area.

　　Vanke's annual report shows that in addition to traditional development business and property services, the company's layout in logistics, commerce, long-term rental apartments, hotels, and ice and snow vacations has achieved results.

　　Zhu Jiusheng said that after more than 6 years of hard work, Wanwei Logistics has built a nationwide warehousing and logistics network. “One out of every two Ferrero chocolates in East China comes from Wanwei Cold Chain Logistics Park.”

　　Evergrande continues to move forward on the road of diversification.

Xu Jiayin, Chairman of the Board of Directors of Evergrande, announced the arrival of "New Evergrande" at the 2020 performance conference. Evergrande will transform from a pure real estate business to a "multi-industry + digital technology".

In addition, Xu Jiayin revealed that Evergrande Motors will start trial production at the end of this year and deliver in large quantities next year.

　　Country Garden President Mo Bin also said that he is confident that construction robots and robot restaurants will be fully profitable next year.

　　But it is not easy for real estate companies to change the track.

At the 2020 performance conference, all three companies spent a considerable amount of time explaining their new business.

But at present, for any company, real estate development is still the absolute main source of income.

More than 95% of the income of Vanke, Evergrande and Country Garden comes from real estate development.

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