Industry executives believe that it is unlikely that the gross profit margin of the housing development business will return to 30%.
Up to now, among the major real estate companies that have successively released their annual reports, many of them represent the steady development of the industry, but none of them have escaped the fate of declining gross profit margins.
According to the incomplete statistics of the first financial reporter, including unaudited performance reports, a total of about 30 large-scale housing companies have disclosed their operating conditions in 2021. Except for Yuzhou and Ligao, the remaining 28 listed housing companies There are various degrees of gross profit margin decline. Among the top 10 housing companies that have disclosed their annual reports, the gross profit margins of China Overseas Real Estate and Vanke have both declined by more than 6 percentage points; 14 housing companies have gross profit margins below 20%, and Greentown also It fell 5.5 percentage points to within 20%.
In the industry, the reason for the decline in gross profit margin is generally attributed to the double squeeze caused by the previous high-priced carryover and the superimposed price limit of new houses.
This situation is expected to be repaired as the land market becomes more rational.
The management of many real estate companies mentioned that the land plots acquired in the land market in the second half of 2021 have good profit margins.
However, will this repair process bring the real estate business back to the heights of the past?
Li Xin, President of China Resources Land, said, "Everyone has a consensus that the gross profit rate will return to about 20% or more." "Every company's situation is different, but the target for the gross profit rate is not much different. A return to gross margins of 30% or more is unlikely."
The gross profit margin of half of the real estate companies fell below 20%
According to the incomplete statistics of the First Financial Reporter, including unaudited performance reports, a total of about 30 large-scale real estate companies have disclosed their operating conditions in 2021, and 28 listed real estate companies have experienced a decline in gross profit margins to varying degrees. .
Previous statistics from Yihan Think Tank showed that by the middle of 2021, the average gross profit margin of the 50 typical housing companies it covers will be about 23.2%.
As of now, 20 housing companies have fallen below this indicator, and their overall profitability has further declined; 14 of them have fallen below 20%, accounting for nearly 50%.
Specifically, among the top 10 real estate companies that have published their annual reports, including Country Garden, Vanke, China Overseas Properties, China Merchants Shekou, China Resources Land, and Longfor Group, the gross profit margins are all showing a downward trend.
Among them, compared with the same period in 2020, Vanke had the largest drop in gross profit margin, which fell from 29.2% in the previous year to 21.8%, a decrease of 7.4 percentage points. Many securities companies' research reports said that the decline "exceeded expectations".
China Overseas Real Estate, known as the "King of Profits", ranked second in the decline in this indicator, with gross profit margin down 6.5 percentage points from 30% in 2020 to around 23.5%, and net profit margin over the same period by over 7 percentage points. The decline fell to 17.78%.
The gross profit margins of China Resources Land and Longfor fell relatively small, both around 4%, 27% and 25.3% respectively; both are supported by relatively mature and profitable investment property operations. During the reporting period, the two The gross profit rate of the company's investment properties is as high as 68.2% and 74% respectively, while the gross profit rate of development properties has actually dropped to around 23%.
In addition, 14 real estate companies have gross profit margins below 20%, and 9 of them will fall below the 20% level in 2021.
Greentown fell more than 5 percentage points from a level of nearly 24% to 18.1%.
It is worth mentioning that although the overall gross profit margin of Seazen Holdings remains at 20.4%, the gross profit margin of its real estate development business has dropped by about 4 percentage points compared with the previous year, and has also dropped to 17.7%.
In fact, the gross profit margin level of real estate companies has entered a downward channel after reaching a periodical high in 2018, and has not yet started the process of return.
According to data from Sinolink Securities, from 2018 to 2020, the gross profit margins of real estate companies were 28.77%, 26.96%, and 23.35%, respectively, with the decline expanding year by year.
According to the statistics of Yihan Think Tank, among the 50 typical real estate companies it tracks, in 2019, 33 real estate companies had gross profit margins between 25% and 35%, and in 2020, about 31 real estate companies had gross profit margins concentrated. Between 20%-30%.
As for the decline in gross profit margin, there has been obvious prediction and consensus in the industry.
Wang Xiaosong, chairman of Seazen Holdings, once again stated at the recent performance meeting that real estate will return to the manufacturing industry from the financial industry.
According to statistics from China National Financial Securities, the 2021 performance announcements released by real estate companies since March show that the average gross profit margin is 18.74%, and the average net profit margin is 8.21%; while the gross profit margin level of the manufacturing industry in 2021 is 20.53%, and the net profit margin is 20.53%. was 7.96%.
High land price meets stress control
Gross profit margin continued to fall, the incentive is still the booming industry has encountered the heavy hammer of regulation.
Since 2015, the accelerated rise in housing prices led by the first-tier cities has started, the land market has been simultaneously detonated, and the investment in housing enterprises has increased significantly.
In 2016, the premium rate of land auctions in first-tier cities exceeded 100% for several consecutive months, and the “land kings” frequently appeared.
Statistics show that in 2016, there were more than 350 cases of "earth kings" across the country.
The hot land market has quickly pushed up the floor price.
Guosheng Securities Research Report shows that in 2016, the average floor price of new land reserves in China Merchants Shekou was around 13,000 yuan per square meter, the peak in recent years.
Simultaneous with the fervor of the prefectures and cities, the price limit orders for new houses issued in succession in various places have restricted the increase in the record price of new houses in many cities. Since then, in 2018, "Housing to live without speculation" was officially proposed, and the industry regulation has been under high pressure for a long time.
As a result, the land acquired at a high price coincided with the promotion of the price limit policy when it entered the market. It was difficult for the project to reach the corresponding selling price as expected by the real estate company, and the profit margin was severely squeezed.
The research report of Dongxing Securities shows that after the first quarter of 2016, after the industry-to-market ratio reached 40%, it rose rapidly and remained at a high level. In 2018, it once exceeded 60%. decline.
This is also the response of executives of various real estate companies when asked about the decline in gross profit margins.
Chen Xuping, CEO of Longfor Group, said that the gross profit of real estate has declined in the past few years, mainly because the land market was relatively hot in the first half of 2017-2018, and now these projects are now entering the settlement channel one after another.
Regarding Vanke, whose net profit has dropped by more than 45%, Yu Liang mentioned that in recent years, the fierce competition in the land market has had a significant impact on the gross profit margin level of the industry. However, it has not been able to resolutely get rid of the inertia of high growth.
"When the pursuit of scale is still popular and the competition for land is intensifying, some cities are chasing high investment, and they are too optimistic about the market. The investment expectations of some projects have not been realized, resulting in a decline in gross profit margins."
In addition, since the second half of 2021, the credit crisis that broke out in some housing companies has led to a significant tightening of financing channels in the industry, and the superimposed sales market has experienced a downturn. mode, which once again compresses the profit space.
"Since the second half of last year, the entire market has rapidly cooled. For the company, being able to survive safely must be the first priority." Wang Xiaosong admitted at the performance meeting a few days ago that since the National Day last year, Xincheng has successively removed some chemical products. Projects under pressure or customers with a high down payment ratio were given a certain discount. The monthly sales in the fourth quarter were more than 20 billion yuan. While the cash flow level was quickly recovered, the average sales price and profit margin were also affected. corresponding impact.
For R&F, which has entered the deleveraging stage in 2019, price reduction promotion is an important means to accelerate sales and promote the return of funds in recent years. Rice, the gross profit margin dropped from 36.4% at that time to 25.2% in 2020.
In 2021, as liquidity pressure further intensifies, it continues to cut prices to "maintain liquidity in the short term rather than focus on profitability", and its gross profit margin will drop to 14.1%.
However, according to Xiao Yunxiang, a senior analyst at the Tongce Research Institute, measures such as price reductions and promotions for rapid return of funds will reduce the gross profit margin in the short term, but in the long run, if the industry does not undergo major changes, the gross profit margin will be in After a small regression, it will maintain a relatively stable range for a long time.
Repair or wait for the industry to stabilize
Recently, the dawn of the restoration of the gross profit margin of the industry has emerged.
In the second half of 2021, due to liquidity pressure, real estate companies have successively suspended the pace of land acquisition. At the same time, under the pressure of land finance, local governments have increased the investment of high-quality land reserves. Many cities will supply the third batch of centralized land in 2021. Lower the threshold for land auctions.
With the reduction of competitors and the release of high-quality land, the profit level of land-acquisition real estate companies can naturally be expected.
Zhang Zhichao, CEO of China Overseas Properties, said that about 50% of the land parcels acquired in the second half of 2021 were obtained at the reserve price or at a very low premium price, and the rate of return for many projects was very satisfactory.
"Shenzhen got 4 in the second half of the year, Guangzhou got 3, and Nanjing also got 3. The scale and quality of investment in these core cities in the second half of last year were very high. Compared with this year's sales, including this year's sales, it proposed steady growth. It has formed a very good support for future profits." Zhang Zhichao said.
Longfor also obtained "safer and cheaper" land during this period.
According to the management of Longfor, after September last year, in its more than 30 core cities, many land plots were obtained at the reserve price, and under the policy of centralized land supply, "the premium rate of land plots is 10%~15%. Just capping it will ensure that developers have better profits.”
It is worth mentioning that the regulation in the past few years has completely changed the expectations of real estate companies for investment and land acquisition.
"In the past, this industry was generally rising, and the price of land was high, and it rose again after two years. It is a long-term upward process." The management of Longfor Group said, "But after July last year, there will be no future. This kind of long-term cycle. In the past, it can rise no matter what, but in the future, once you get the wrong land, you may not be able to sell it, or you will lose a lot."
Therefore, when talking about the land acquisition strategy in 2021, Chen Xuping said that it is necessary to focus on bottom-line indicators such as gross profit rate and net profit rate, live within our means, obtain rationally, and always adhere to the investment principle.
Lin Zhong, chairman of the board of directors of CIFI, also said that the first requirement of CIFI's investment discipline is that the acquisition of land is for profit, not for supporting the team and scale.
In the second half of 2021, Vanke has also changed its land acquisition model.
Yu Liang said, "We have raised the requirements for investment, such as the level of profitability of investment projects, the requirements for the ability of the trading team, and the requirements for post-investment management, all of which are constantly improving."
Each company also has different plans for when the gross profit margin is expected to usher in a growth recovery.
Yang Xin, CFO of CIFI, said, "In 2022 and 2023, we hope to have a relatively stable profit performance, and hope to resume growth in 2023." Vanke said that in the next two years, the gross profit margin of the development business will remain at 20%. % level.
The management of Country Garden put forward a more cautious point of view, saying that the entire industry is now in the stage of adjustment and clearing, and some companies with greater liquidity pressure are also conducting relatively large sales of assets, and they will have to wait for the clearing process to approach. At the end, or after the clearing, the industry enters a relatively stable state, and the gross profit margin will recover again, and before that, the gross profit margin may remain in a relatively low state.
Yu Xiaoyu, research director of Yihan Think Tank, believes that the status quo faced by real estate companies in 2021 is not ideal, whether it is the land side, the sales side or the expense side, and 2021 may become the bottom range of real estate company profits, which is expected to be in 2023. This year is also presented in the company's 2022 annual report, and then stabilizes.
Author: Zheng Na