Producer: Sina Finance Listed Company Research Institute
Author: Big Eye Building Tube/Sean
Recently, China Overseas Land & Investment Co., Ltd. (hereinafter referred to as "China Overseas Real Estate") released the company's third quarter results briefing, and as most real estate companies gradually came out of the downturn in Q2, China Overseas Real Estate has been in a somewhat "deteriorating" situation.
In the third quarter, China Shipping Group's quarterly revenue and operating profit fell by 59.48% and 77.50% year-on-year, respectively, and its operating profit margin fell by 13 percentage points year-on-year to 10.2%. If China Overseas Real Estate's third-quarter performance declined in stages due to fluctuations in the pace of project carryover, it did not hurt the fundamentals of performance, but the net profit margin fell by 10 percentage points in two years, or to a considerable extent, it reduced the company's profitability and endogenous hematopoietic ability.
In the new era, in the face of the trend decline in the industry's profit margin gradually returning to a reasonable level in the manufacturing industry, is the high interest rate of China Overseas Real Estate still reasonable, and how much room for decline?
Sales carryovers in the third quarter were not smooth
With the weakening of the impact of the epidemic on property sales and the decline in the base of the same period last year, the mainland commercial housing sales market has gradually ushered in marginal improvement in the third quarter. Kerry data shows that the monthly sales of the top 100 housing companies in July, August and September in the third quarter fell by 39.7%, 32.9% and 25.4% year-on-year respectively, which is an obvious sign of stabilization compared with the average decline of more than 50% in Q2, and the absolute volume of monthly sales is also gradually rising.
Among them, central enterprises, state-owned assets or some differentiated stable real estate enterprises performed well, such as China Resources, Longhu, Yuexiu, Binjiang Group, etc., but among them, China Overseas Real Estate unexpectedly weakened against the trend.
From January to September 2022, China Shipping Group achieved full-caliber (including China Overseas Hongyang Group Co., Ltd.) property sales of about 201.3 billion yuan, down 26.9% year-on-year, and a cumulative sales area of about 9.2265 million square meters, down 34% year-on-year. The improvement from the decline in the first half of the year is limited, and it is more noteworthy that the contracted property sales of China Overseas Real Estate in the third quarter were 62.8 billion yuan, down 30.39% from the previous quarter.
As of the first half of the year, the land reserve of China Overseas Real Estate was 74.39 million square meters, compared with the 9.2265 million square meters sold in the first three quarters, the speed of soil storage of China Overseas Real Estate was not ideal. This may also be one of the reasons why it has significantly slowed down the pace of land acquisition this year.
In the first three quarters of this year, China Overseas Real Estate added a total of 31 new land plots in 13 cities in China, with a total new floor area of 5.53 million square meters and a total land price of 81.21 billion yuan, a year-on-year decrease of 19%. Among them, in Q3, China Overseas Real Estate added a new floor area of 1.95 million square meters, with a total land price of 32.2 billion yuan, a year-on-year decrease of 41%.
In the face of weak Q3 sales, it is expected that China Shipping Real Estate will maintain its strategy of acquiring less land in the future. However, it is worth noting that the average land price of China Overseas Real Estate this year is 14,700 / square meter, which is even an increase of 32.4% compared with 11,100 / square meter in the same period last year. This is not good news for China Shipping, which is already plagued by declining profit margins and sluggish performance.
Plummeting profit margins: "excess" margins may still have room to decline
Zhonghai not only encountered a cold in sales, but also seemed to have some twists and turns in the construction carryover.
In the third quarter, due to the significant decrease in property delivery, China Overseas Real Estate only achieved revenue of 17.52 billion yuan, deducted non-net profit of 1.8 billion yuan, and its quarterly revenue and operating profit fell by 59.48% and 77.50% year-on-year, respectively, and its operating profit margin fell by 13 percentage points year-on-year to 10.2%.
Compared with the total revenue of 121.31 billion yuan and non-net profit of about 25.81 billion yuan in the first three quarters, the performance of China Overseas Real Estate in the third quarter can be described as "volume and price decline".
"Volume" aspect. Judging from the seasonal situation in recent years, China Overseas Real Estate tends to be a small trough period for carry-over and revenue generation in Q3, and relatively speaking, the second and fourth quarters are often the peak periods of carryover. However, even this cannot hide the "abnormality" of China Shipping in terms of completion carry-over in recent years.
Compared with 2020 and 2021, the first quarter of this year and previous years basically steadily increased the situation, and the quarterly carryover began to decline, if Q2 was more affected by the epidemic, Q3, which has been basically effectively controlled, shows a sharp decline compared with previous years.
Considering that China Shipping sales have continued to grow in recent years, there is a high probability of delayed delivery behind the decline in delivery volume. And guaranteed delivery has become one of the corporate credits that buyers value very much this year.
"Price" aspect. In recent years, the profit margin carried forward by China Shipping has shown a trend of decline, and Wind data shows that its net profit margin has slipped from 25.5% in 2020 to 16.86% in 2022Q2, a decline of nearly 10 percentage points in two years. In Q3, the operating profit margin excluding fair value changes and exchange gains and losses was only 10.27%, and it can be expected that the profit margin of China Shipping for the whole year may decline again on the basis of the semi-annual report, which will suppress the annual performance.
In fact, in the case of a general decline in profit margins in the real estate industry, China Overseas Real Estate is no exception.
Combing through the semi-annual report data of the top 100 mainstream housing companies (including those that have not released semi-annual reports), the net profit margin level of 16.86% is in the top 10%, far exceeding the average profit margin level of the industry, such as Vanke (8.7%), Yuexiu (8.2%), Xincheng (7.8%), and Greentown (7.5%). Xuhui (6.4%), etc.
It is worth mentioning that China Shipping's "excess" profit margin is also unsustainable from the perspective of the company's land price and sales price.
From 2018 to 2022, although Zhonghai focuses on first- and second-tier cities, its average sales price has not increased significantly, basically hovering around the average price of 20,000 yuan / square meter. At the same time, the average price of its land has increased significantly, from 8181 yuan / square meter in 2018 to 14835 yuan / square meter in 2022H1, an increase of 81%, and the average sales price in the same period is only 17%.
The scissors difference between land prices and selling prices has been compressed, and the increase in construction and installation and labor costs has made it logical that China Overseas Real Estate's profit margin has trended downward. In addition, judging from the trend of the past few years, we can expect that the profit margin of China Shipping will most likely continue to shrink in the next few years, or tend to the current level of about 7% of the industry draw.
Before that, Zhonghai's performance may face greater pressure and fluctuations.