Housing Enterprises "First Legion" Annual Report Scan: Farewell Market Dividends, Pay Attention To Cash Flow.

630 billion 800 million yuan, 601 billion 100 million yuan, 552 billion 200 million yuan (equity), 556 billion 200 million yuan.

In March 31st, as Hengda's 2019 performance dropped, China's real estate "first army" - Vanke, Hengda, Biguiyuan, and Chong Chong 2019 sales surfaced.

In recent years, listed housing companies have disclosed their performance in 2019. Both scale and profit have increased. They have abundant reserves and controllable liabilities.

But at the same time, with the fierce competition in the industry and normalization of property market regulation, some indicators began to go down, such as gross margin and net profit margin. The decline of profit margins has covered the whole industry. Apart from the "first army", the profitability of the first group has been reduced. "Profit king", Longhu, "Mr soundness", has not been spared. In some financial analysts, this means that housing prices are bidding farewell to market dividends.

Therefore, when the financial industry announced prudent mergers and acquisitions and tried to sell the holding projects, the "wind direction" of the real estate industry seems to have changed. In the first quarter of 2020, under the superposition of the new crown pneumonia epidemic situation, the real estate industry no longer had the usual high emotions.

Will they be able to land safely this time?

Where have all the profits gone?

In 2019, Vanke's gross profit margin dropped from 37.48% in 2018 to 36.25%. Among them, the gross profit margin of real estate and related businesses was 27.2%, down 2.5 percentage points. After two consecutive years of growth, Vanke's gross margin of real estate business has declined.

In 2019, the profit margin of the "profit king" was 33.7% and the net interest rate was 25.4%. Longhu, known for its robustness, had a gross profit margin of 33.6% last year and a core tax profit margin of 15.5%. The latter index has declined for two consecutive years. The Offshore Group's net interest rate dropped to 8.18%, declining for three years in a row.

The implementation of the "price to volume" strategy Hengda gross profit margin from 36.2% in 2018 to 27.8%, a decrease of 8.4 percentage points.

In 2019, Xu Hui, Huarun, Xincheng holdings and other large housing enterprises all saw a decline in profit margins. In the head housing sector, only the gross profit margin of the financial company rose from 25% in 2018 to 25.1% in 2019, but this is not a high level.

The general decline in profit margins reflects the reality of the drop in profitability of housing companies. It is easy to see from the annual report of the head office that this is mainly due to the weak sales price growth and the increase of various costs.

In terms of price, in addition to the "price to volume" strategy, the "limit order" issued by various locality has become an important factor in "nibbling" profits. In recent years, when the commercial housing project in Beijing is being put on record, it is generally faced with the fact that the price is too high to be approved. This not only delays the market entry time, but also increases the cost of capital.

Cost increase is a major trend in recent years. The Research Center pointed out that last year, the price of newly built earth storage floor was about 9994 yuan per square meter, up by 61% over the same period last year. Taking into account the cyclical nature of real estate development, this will not only affect the present, but also affect future performance. Goldman Sachs expects gross domestic product to fall further to 32% this year.

THC is facing the pressure of financing cost and selling cost. The average cost of financing in 2019 was 8.1%, up from 6.8% in 2018. Last year, the cost of sales increased by 36.6%, significantly higher than the 20% increase in sales. However, because more than 60% of the land consolidation costs were acquired through mergers and acquisitions, the land cost was relatively low, so that its profit margins could not be maintained.

A financial analyst pointed out that profit margins declined, indicating that housing prices are bidding farewell to this round of market dividends. This is not uncommon in China's past real estate cycles.

Because of frequent market regulation, enterprises can hardly keep pace with the pursuit of profits while maintaining sales growth. Take Vanke as an example. From 2010 to 2016, Vanke's gross margin of real estate business dropped from 29.61% to 18.5%. By the current round of market dividends, by 2018, the index rose to a high level of 29.7%, but fell again in 2019.

In fact, Vanke's profit margin has slipped in its interim performance in 2019. In August last year, Wang Wenjin, who was the financial controller of Vanke Group, said that with the rising land price ratio, the downward trend of gross profit margin in the future is a long-term trend in the industry. In March this year, President Vanke expressed his view again.

This view has become the consensus of the industry. In March 31st, Xu Jiayin, chairman of the board of directors of Hengda Group and Xia Haijun, vice president, said at the performance meeting that "the golden age of real estate is gone".

Defense capital chain

Because of this trend, large housing companies are generally conservative in the 2020 performance target setting.

Vanke and Biguiyuan did not announce their sales targets for 2020. Taking into account the impact of the new crown pneumonia epidemic, holding 800 billion of the sales value of the financial creation, the sales target adjusted to 600 billion level. Longhu, which has always been conservative, has set a sales target of 260 billion this year, a 7.2% increase over last year's actual sales.

Although some enterprises still have scale pursuit, in 2020, the sales target set by large housing enterprises generally increased by less than 20%. Among them, the sales target set by Xincheng holdings is 250 billion, even lower than the actual sales level last year (270 billion 800 million yuan).

Compared with a single scale index, enterprises consider more overall safety. In recent performance meetings, ensuring financial stability and cash flow security has become a high-frequency word in the management of Housing enterprises. Fuli has made clear the target of reducing liabilities this year, while Biguiyuan emphasized cash flow.

"We didn't want to mention sales targets this year. We don't think sales targets are very important." In March 27th, Sun Hongbin, chairman of China's board of directors, said at the performance meeting that profits and falling liabilities have become the first after this scale. The company hopes to be steady and safe, and improve profits through improving the overall competitiveness.

Moreover, in recent years, continuous mergers and acquisitions have begun to face the M & a market cautiously. Sun Hongbin believes that this year's M & A opportunities will increase, but there may not be many good targets, so the company will be very cautious. At the same time, financial innovation is trying to sell its property, hotel, commercial and other property, and reduce the cost of financing.

Shimao, who has just completed a substantial merger last year, has expressed similar views. Xu Shitan, vice-chairman and chief executive officer of Shimao Group's board of directors, pointed out that this year's M & A has greater opportunities, but the standards for acquisition and merger will be stricter and better.

Yan Yuejin, director of the think tank center of Shanghai Yi Ju Real Estate Research Institute, pointed out that the real estate industry has relatively strong tolerance due to its rigid demand and cyclical fluctuations, but the impact of the epidemic can not be ignored. For example, the general decline in sales in the first two months of this year will result in short-term financial pressure on housing companies. In addition, although there has been a resumption of work, there is still some doubt about the prospect of market recovery after the outbreak.

According to the twenty-first Century economic report, many enterprises have already started the adjustment of salary, structure, personnel and other systems because of the need to reduce costs and increase efficiency and the external pressure brought by the new crown pneumonia epidemic. Among them, the phenomenon of pay reduction has been quite common in the real estate industry. Many housing companies have launched management structure adjustment and personnel removal, involving Biguiyuan, Rong Chong, Huaxia happiness and other large enterprises.