"Profit King" Zhonghai Real Estate has a rare decline in profits, and has been a large premium to obtain land until the cost rises

Editor's Introduction: When other private enterprises are dominated by capital crises, China Overseas Real Estate, which has financing facilities backed by central enterprises, frequently takes land to expand its scale, and the reason for its decline in net profit may be related to its frequent premium land acquisition in recent years.

Photo/ Baidu Encyclopedia

Recently, China Overseas Real Estate released its 2021 performance report.

The report shows that its revenue increased without increasing profits last year, its profit margin and net profit margin have fallen sharply, and it has hit the threshold of 400 billion yuan for two consecutive years without success.

Known as the "profit king", China Overseas Real Estate was actually the first echelon with Vanke and other housing enterprises in the early years, and because its profit volume dominated the list for many years, it once became a benchmark in the industry, but since its business restructuring, it has been kicked out of the first echelon due to slow growth.

Perhaps unwillingly, in today's industry downturn, private enterprises are too late to save themselves, backed by the central enterprises with financing facilities of China Overseas Real Estate frequent premium to expand the scale, many times to win the land king.

But because of this, its once proud net profit has seen negative growth for the first time in five years, but even so, China Shipping has not stopped, perhaps it is not worried about financing and funds, but the profit space that has been squeezed repeatedly may make the hat of The "Profit King" of China Shipping unstable.

The increase in profit does not increase revenue, and the net profit margin has declined year after year

On March 31, China Overseas Real Estate released its 2021 annual report.

According to the annual report, China Overseas Real Estate's 2021 operating record was 242.24 billion yuan, an increase of 30.4% year-on-year, of which commercial property income was 5.17 billion yuan, an increase of 17.4% year-on-year; net profit attributable to the mother was 40.16 billion yuan, a year-on-year decrease of 8.54%; net profit margin was 23.54%, down 7% year-on-year.

In terms of sales data, in 2021, China Overseas Real Estate Series Companies achieved contracted sales of 369.5 billion yuan, an increase of 2.4% year-on-year.

From the perspective of collation, the achievements handed over by China Overseas Real Estate can be said to be quite beautiful in the context of today's industry downturn and housing enterprises have thunderstorm, but under this beautiful performance, it is China Overseas Real Estate, which was once known as the "profit king" in the industry, and the first annual net profit in the past five years has declined.

It can be seen that China Overseas Real Estate is not smallly affected by the overall downturn of the industry in 2021.

It is worth mentioning that the sales target of China Overseas Real Estate in 2021 and 2020 is set at 400 billion yuan, but the actual completion rate in 2020 is 90.18%, while the actual completion rate in 2021 is 92.38% (the target is achieved in Hong Kong dollars). That is to say, China Overseas Real Estate has hit the threshold of 400 billion yuan twice in a row but has failed to return, and now China Overseas Real Estate, which "increases revenue without increasing profits", can it really sit firmly on the throne of "profit king"?

Judging from the data, the reason why its income is not increasing today may be related to the sharp decline in profit margins.

According to the annual report, the profit margin of China Overseas Real Estate has dropped from 30% last year to 23.54% this year.

Judging from the performance of its net interest rate in recent years, it has already declined. Among them, from 2018 to the end of 2021, the net profit margin of China Overseas Real Estate was 27.2%, 26.1%, 25.7% and 16.6%, respectively. That is to say, its net profit margin has fallen for four consecutive years, and the decline will be the most severe in 2021.

The "profit king" slowly fell out of the first echelon

Although China Overseas Real Estate has experienced a decline in net profits and no increase in revenue, it can be crowned with the hat of "profit king", and its development at its previous most brilliant time will inevitably achieve remarkable results.

Earlier, China Overseas Real Estate was actually a leading enterprise of the same level as Vanke, dominating the first echelon of housing enterprises, and down to Evergrande, Country Garden and other housing enterprises, but compared to China Overseas, it was more low-key.

Once China Overseas Real Estate, the gross profit margin level remained between 33% and 35% for more than ten years, once became the industry benchmark, and therefore China Overseas was crowned the title of "Profit King" in the industry.

At the same time, due to the strong talent training ability of China Shipping, it is also known as "Whampoa Military Academy" by the domestic real estate industry.

However, compared with the title of "Profit King", the origin of "Whampoa Military Academy" is somewhat sad.

Since 2013, after the restructuring of China Overseas Real Estate business, it has been kicked out of the first echelon because of its slow development speed. But even so, its profits are still among the best, the so-called guilt, so that the good way to ensure profits, is naturally coveted by competitors in the industry.

It is reported that Vanke first launched the famous "pirate" plan, that is, using high salaries to dig people from the middle sea. Subsequently, a number of radical real estate enterprises such as Longhu and Country Garden have also followed suit from Zhonghai to recruit people, and as a result, Zhonghai has become the "Whampoa Military Academy" in the industry.

Perhaps aware of its own slow development, but not willing to fall behind, in order to return to the first echelon, China Shipping has been aggressively acquiring land since 2018.

Frequent high premiums to obtain land, the cost of expenditure is higher

When other private enterprises are dominated by capital crises, China Overseas Real Estate, which relies on the financing convenience of central enterprises, frequently expands its scale with land, and the reason for the decline in its net profit may be related to its frequent premium land acquisition in recent years.

According to the annual report, in 2021, China Overseas Real Estate Series Company added 98 new land reserves, and the amount of equity land purchase was RMB161.02 billion. Among them, the Group added 57 new land reserves, and the amount of equity land purchase was RMB129.75 billion.

Between 2019 and 2021, the average price per square meter of the new land reserve in China Shipping has gradually increased, with the average price of 10,300 yuan, 0.99 million yuan and 12,800 yuan respectively, and the cost accounts for more than 40% of the average sales price.

At the same time, due to repeated premiums to obtain land, China Shipping has also won the "land king" many times in recent years. In March last year, China Shipping won the new land king of Zhengzhou Beilonghu for 2.5 billion.

It is reported that in 2021, 23 plots of land parcels in China Overseas Real Estate were acquired at the reserve price or low premium, accounting for 40% of the number of land parcels traded in the whole year, and nearly 50% of the land plots traded in the second half of the year were at the reserve price or low premium.

For the reasons for frequent land acquisition, China Overseas Real Estate said: "In the second half of last year, there were not only opportunities, but also in the rate of return, which was relatively outstanding in recent years, and formed a good support for future profits." ”

However, the continuously high cost of obtaining land will eventually affect the profit margins, and the result of this year's "increase in income without profit" is also the sequelae of its wanton land acquisition.

Recently, in the first batch of centralized land supply in Chengdu, China Overseas Real Estate obtained three plots of land all from the high-tech zone and Tianfu New District, with a total transaction area of about 229.3286 mu, second only to Chengdu City Investment Land, and with a transfer fee of 56.51 yuan, it became the largest housing enterprise with the largest amount of land.

That is to say, even if the performance declines and the industry winter continues, China Overseas Real Estate still does not intend to close. However, in the context of its back to central enterprises and financing facilities, it is presumably not too concerned, but while the continuous high price of land affects profits, the hat of the "profit king" is afraid that it will not be stable.

Original author: Tianyi

Editor: Qiu Tianyi