It will soon be the New Year, and this article is also the last company analysis in 2022 in the lunar calendar, so I specially chose "Vanke", an excellent real estate company. (Write a weekly summary tomorrow summarizing the companies analyzed this week.) ）
For the vast majority of people, the meaning of the house is "home", and having a place to live in completely their own is the goal of thousands of young people who strive in big cities.
Vanke is undoubtedly one of the best real estate companies, and I would like to express my expectations for the real estate industry, and there are more excellent real estate companies that can survive this wave of downturn and become more and more excellent.
The real estate economy has always been one of the key pillars, and I hope that the mainland economy will get better and better, and our people will become more and more prosperous!
Natural selection, survival of the fittest, whether for individuals or enterprises, is like this, there is nothing wrong with eliminating a group of bad enterprises, and the remaining excellent enterprises can work hard to develop.
Since the Central Economic Conference at the end of 2016 first proposed that "houses are for living, not for speculation", the government has used a series of means such as finance and taxation, finance, and land to carry out macro-control of real estate, and the hot domestic real estate market has gradually begun to cool down.
The outbreak of the new crown epidemic at the end of 2019 caused the global economy to suffer a crisis, and the "three red lines" of real estate were introduced at the end of 2020, and the industry was further delevered.
Under the combined effect of various "favorable time and place", the new housing market began to fall off a cliff by mid-2021. So far, the sales area of commercial housing in the country has fallen for 15 consecutive months, and the absolute value of monthly sales area has fallen back to 2012.
Real estate, as an important part of China's GDP, has always been pivotal, and after this strong reshuffle, the market value of the once prosperous China Evergrande has fallen from HK$380 billion in 2017 to HK$20 billion now, which is embarrassing.
However, compared with the major real estate giants that continue to thunder, Vanke is still stable at the head of real estate, let's learn more about it, why can Vanke stabilize?
1. Company
Vanke is a well-known leading real estate development enterprise in China, with a history of nearly 40 years, and it can be said that Vanke's development is of representative significance in the history of China's real estate enterprise development.
In 1983, the Trade Department of Shenzhen Special Economic Zone Development Company established the feed department, and Wang Shi was the section chief of the feed department at that time.
In 1984, the feed department was transferred to the Ministry of Trade's science and instrument department, registered the state-owned Shenzhen modern science and education instrument exhibition and sales center, the company's legal person is Wang Shi, which is the predecessor of Vanke, the main business at that time was the sales of automated office equipment.
At that time, the country was in a period of rapid development of trade economy after reform and opening up, and the average annual GDP growth rate in 1984 and 1985 was 14.35%, and Vanke also accumulated raw capital in this wave of rapid development, but at this time it was not related to real estate.
In 1986, the Shenzhen Municipal Government promulgated the "Interim Regulations on the Pilot Joint-Stock Scheme of State-owned Enterprises in Shenzhen Special Economic Zone", Vanke responded positively, cooperated closely with Sony Corporation of Japan, and cooperated with China Instruments Import and Export Corporation to set up the Shenzhen branch of Sony Technical Service Center in Japan, and established the first industrial investment project "Jingshi Enterprise Co., Ltd." in 1987.
Subsequently, in 1988, the shareholding system reform was successfully completed, and the company was publicly raised 28 million yuan, and the company was officially renamed Vanke Enterprise Co., Ltd.
In November of the same year, Vanke bid for the Vuitton villa plot for 20 million yuan, marking Vanke's entry into the real estate industry, and in 1990, Vanke developed and completed Vanke's first residential real estate project, Shenzhen Skyview Garden.
Due to the impact of the market, the company's original equipment sales business gradually declined, while the industrial and real estate business flourished.
As a result, Vanke rearranged in 1990 and added new investments in chain retail and film production, forming a layout in which four major businesses coexisted: commerce, industry, real estate and cultural communication.
In 1991, Vanke was successfully listed on the Shenzhen Stock Exchange and was the first listed real estate company in China and the second listed company on the Shenzhen Stock Exchange with the stock code 000002.
The first listed company on the Shenzhen Stock Exchange must be familiar to everyone, which is Ping An.
In December of the same year, Skyview Garden established China's first owners' committee, created a new property management model of "combining owner autonomy and professional services", and established Shenzhen Vanke Property Management Co., Ltd. in January 1992.
After Deng Xiaoping's speech on his southern tour in 1992, the State Council listed real estate as one of the pillar industries for the development of the national economy and issued the Notice on Several Issues Concerning the Development of Real Estate.
However, in just one year, real estate has been over-inflated, and the state has carried out macro-control.
Feeling the pressure of liquidity, Vanke decided to put the brakes on the diversified layout, establish specialized management with real estate as the core by doing subtraction, and propose a development policy to accelerate capital accumulation and form specialized and large-scale operation.
In 2000, Vanke Property contracted the property management services of the office building and residential building of the Ministry of Construction of the People's Republic of China, and later obtained a credit line of 2 billion yuan from the head office of Bank of China.
Rapid expansion while raising funds was the development model at that time, and this round of expansion increased Vanke's sales scale from 3.7 billion yuan in 2000 to 6.3 billion yuan in 2003.
In the same year, China Resources began to acquire Vanke's shares, becoming Vanke's largest shareholder, and also laid the groundwork for the well-known "Baoneng Vanke Dispute" in the real estate industry.
The process of the Wanbao dispute is very exciting, ups and downs, and there is time to tell you the story in detail later, which is definitely better than ordinary novels.
Don't hurry up and give a like to support it.
China Resources is also a comprehensive and representative large company, and you can have the opportunity to talk later. In 2001, Vanke transferred 72% of the shares of Wanjia Department Store to China Resources, which was regarded as a complete transformation from diversification to real estate specialization.
By 2004, Vanke proposed a refined and qualitative expansion, aiming to reach 100 billion sales by 2014 ten years later.
In order to achieve this goal, Vanke began to deploy globally, focusing on the economically developed cities of the Yangtze River Delta, Pearl River Delta and Bohai Rim region, which made this goal achieved four years ahead of schedule.
In 2010, Vanke became the first real estate enterprise in China with annual sales of more than 100 billion yuan.
Due to the dispersion of Vanke's shareholding, as long as it has strong financial strength, it can absorb circulation in the market and become the largest shareholder.
Therefore, in the second half of 2015, an extremely fierce equity dispute occurred in the A-share market - the Baowan dispute.
Participating in this capital market "war" are China Resources Group, which became Vanke's largest shareholder in 2000, Baoneng Group, Anbang Insurance, Evergrande Group, which made its fortune selling vegetables, and now Vanke's largest shareholder, Shenzhen Metro Group (Shenzhen State-owned Assets Supervision and Administration Commission Holdings), all of whom want to take Vanke's fat and become the largest shareholder and control Vanke.
The "Baowan Dispute" was wonderful and exciting, and Yao Zhenhua once achieved his goal and became the largest shareholder of Vanke.
However, the final result was that the source of tens of billions of funds used by Baoneng in the process of absorbing Vanke's outstanding shares was questioned by regulators, resulting in Anbang Insurance being investigated, Baoneng gradually reducing its holdings in Vanke, and Shenzhen Metro finally becoming the largest shareholder of Vanke.
In 2021, Vanke ranked 160th in the Fortune Global 500 and is also the company with the largest market capitalization in the A-share real estate development sector after the close of trading on January 16, 2023 (total market capitalization of A-shares: 217.494 billion).
2. Products
Vanke's products all revolve around houses, and we look at them separately
In 2021, Vanke's real estate and related business revenue was 429.932 billion yuan, accounting for 94.95% of the company's total operating income, which is currently Vanke's core main business.
Property service revenue is 19.831 billion yuan, accounting for 4.38% of the company's total operating income, and the cloud of all things (2602. HK) has been listed on the Hong Kong stock market in September 2022.
The operating income of other businesses was 3.035 billion yuan, accounting for 0.67% of the company's total operating income, including Wanwei logistics in logistics business, parking apartments in centralized apartments, commercial development and operation, hotels and vacation services, etc.
1. Real estate development
Take the land first, then develop.
The intensity of land acquisition in the above figure is calculated according to the amount of money spent on land acquisition each year compared to the contract sales amount of the house sold in the previous year, and it can be seen that 2017 is the peak of recent years, and it has basically been declining year by year since 2017.
In recent years, the amount of land taken by Vanke has basically remained at about 130 billion yuan per year, ranking among the top three in the industry, but the land area is declining, which is cautious.
Vanke's cycle of soil storage and destocking in recent years has also been relatively stable, basically maintaining it at about 3 years.
Vanke has also mentioned a "5986" principle, that is, start construction 5 months after acquiring land, start selling houses after 9 months, sell 80% of the houses in the first month, and 60% of the products must be residential.
Of course, this principle is suitable for the hot real estate market at that time, and although it is now a period of deleveraging, the principle has failed, but the awareness of high turnover also applies.
By the end of 2021, Vanke's land reserve area to be developed was 45.22 million square meters, the land reserve under construction was 103.67 million square meters, and the total land reserve area was 148.89 million square meters, and it has remained relatively stable in recent years.
Looking at the distribution of Vanke's land reserves across the country in 2021, in fact, there are land distributions in all regions, and the distribution is relatively uniform.
In particular, it is noted that the Shanghai area includes Shanghai, Zhejiang Province, Jiangsu Province, Anhui Province, Beijing Area includes Beijing City, Hebei Province, Tianjin City, Shandong Province, Shanxi Province, and the land reserve of Shanghai and Beijing Region accounts for 18% of the total.
However, from the perspective of urban development level, Vanke's land reserve in second-tier cities accounts for 58%, while the land reserve in first-tier cities is only 9%.
On the one hand, the price of land acquisition in first-tier cities is relatively high, and the price difference is relatively small.
For example, in 2021, Vanke's average land acquisition price in Shanghai was 13,162 yuan per square meter, and the average sales price was 19,793 yuan per square meter, with a price difference of 6,631 yuan.
In the southern region, the average land acquisition price is 9,079 yuan per square meter, the average sales price is 22,908 yuan per square meter, and the price difference is 13,829 yuan, which is almost double that of Shanghai.
On the other hand, as the development of first-tier cities is gradually saturated, the growth of core second-tier cities will be more rapid in the future, and Vanke can deploy second-tier cities in advance, so that it can save land purchase costs while enjoying the dividends brought by urban development.
In 2021, Vanke signed a sales area of 38.078 million square meters, with a signed sales amount of 627.78 billion yuan, with a market share of 3.5%.
It can be seen that Vanke's contracted sales area has declined in 2021, but it is still in the top three.
Among Vanke's sales products, residential accounted for 86.4%, and the largest proportion was in Shanghai, with a sales amount of 224.48 billion yuan, accounting for 35.7%.
2. Property services
As mentioned in the first part of the article, Vanke's first real estate housing project, Shenzhen Skyview Garden, was completed at the same time, Vanke Property was established.
By 2020, the company changed its name to All Things Cloud Space Technology Service Co., Ltd., and was listed on the Hong Kong stock market in 2022, so Vanke's property service business has a history of 30 years.
As of 2021, there are 4,393 projects under management with an area under management of 780 million square meters, 5,553 contract management projects, and a contract management area of 1.01 billion square meters.
It is explained here that for real estate companies, due to land acquisition, development, and sales, the period of turnover is generally several years, so there will be a certain time difference between the number on the contract signing and the actual number of the year, and there will be two values.
In 2021, the operating income of All Things Cloud was 23.71 billion yuan, ranking second after Country Garden Services.
According to the object of service, the cloud has formed three major business systems, namely community, commercial enterprise and urban space, which is also known as the "troika" system.
As shown in the figure above, each system contains different services, such as community space services, which include basic property services, house leasing, house redecoration and parking space sales.
The technical support supporting this "troika" system includes AIoT (Artificial Intelligence Internet of Things) and BPaaS (Delivery Business Process) solutions, which are mainly to improve service efficiency.
Vanke holds a total of 62.889% of the equity of All Things Cloud, and part of the project of All Things Cloud also relies on Vanke.
Among them, as of 2021, there are 1,605 third-party residential projects under management (that is, excluding Vanke), accounting for 56.9% of residential projects under management, and 1,319 third-party commercial enterprise projects under management, accounting for 84% of the commercial enterprise projects under management.
By the way, the "butterfly city" model of All Things Cloud, also known as the All Things Cloud Street Model, is a solution proposed in the face of difficult property fee price increases and rising labor costs.
Specifically, "butterfly city" refers to the strategic selection of key streets in economically active cities, and the construction of service areas within 30 minutes with a radius of 3 kilometers, which is actually the concept of community.
35% of the funds raised by All Things Cloud's Hong Kong stock market listing will be used to expand the "Butterfly City" project, aiming to reach 38% market share in 3,402 target streets in 100 economically active cities.
3. Other business
The operating income of other businesses in 2021 is 3.035 billion yuan, accounting for 0.67% of the total revenue, compared with real estate development and property services, the proportion is relatively small, here are three relatively representative brief introductions.
(1) Wanwei Logistics
Wanwei Logistics is a logistics platform launched by Vanke in 2015, and acquired Swire Cold Chain in 2018, and the current storage scale of cold chain has reached the first in China.
As of 2021, Wanwei Logistics has operated and managed 152 warehousing projects in 46 cities across the country, with a leasable area of 11.36 million square meters.
(2) Parking
Vanke was involved in the residential leasing business as early as 2008, and Boyu is a long-term rental apartment brand launched by Vanke in 2016 after integrating the long-term rental apartment business.
It is mainly to provide one-stop residential solutions for urban youth. As of 2021, Park Apartment has been distributed in 33 cities across the country, with about 160,000 high-quality listings, serving 520,000 urban youth, and is the largest centralized apartment provider in the country.
(3) Commercial development and operation
This business was mainly due to Vanke's acquisition of a 96.55% stake in Printi Group, formerly known as Shenzhen SDIC Commercial Real Estate Development Co., Ltd., in 2016.
It has four "impression" shopping center products - "Impression City, Impression Hui, Impression Inside, Impression City MEGA", speaking of Impression City, everyone must be familiar with it, the specific situation can refer to the top ten commercial projects operated and managed by Vanke above.
As of 2021, a total of 105 fragrant rice are operated and managed, distributed in more than 50 cities across the country, with an area under management of nearly 8.75 million square meters and an asset scale of about 90 billion yuan.
3. Performance analysis
As we all know, for real estate development enterprises, financial health plays a crucial role, because real estate enterprises generally rely on highly leveraged financing, take land to build buildings, and then wait for the sale of buildings to pay back.
Therefore, controlling the financing of real estate developers can relatively reduce risks.
Here is an introduction to the "three red lines" indicators released by regulators for the financing of real estate developers in 2020 and implemented in 2021, which are:
(1) The asset-liability ratio after excluding advance receipts does not exceed 70%;
(2) The net debt ratio does not exceed 100%;
(3) The cash short-debt ratio is not less than 1.
First explain these three indicators, the establishment of this first indicator was also mentioned earlier, in fact, because of the special nature of housing enterprises, there will be a lot of advance receipts, so the calculation of the asset-liability ratio is excluded from the advance receipts.
The net debt ratio of the second indicator refers to the ratio of interest-bearing liabilities to owner's equity after deducting monetary funds.
The cash-to-debt ratio of the third indicator refers to the ratio of monetary funds to short-term interest-bearing debt.
According to these three standards, real estate enterprises are automatically divided into four stalls: "red, orange, yellow and green", and different stalls correspond to different borrowing standards.
The red file is that these three lines have touched, the net asset-liability ratio after excluding advance receipts exceeds 70%, and the net debt ratio exceeds 100%, and the cash short-debt ratio is greater than 1, and the real estate enterprises in the red file cannot borrow money in the bank.
Correspondingly, if two of the lines are touched, then it is classified as an orange file, and you can borrow money at the bank, but the overall increase in liability does not exceed 5% every year.
If there is only one line, it is yellow, similar to orange, except that the increase in debt does not exceed 10% per year.
If you don't touch any three lines, you're green, healthy, you can borrow money from the bank, and your annual debt increase doesn't exceed 15%.
At the end of 2021, Vanke's asset-liability ratio after excluding advance receipts was 68.4%, less than 70%, the net debt ratio was 29.7%, less than 100%, and the cash-to-debt ratio was 1.5, which was greater than 1, so Vanke belongs to the green file in the "three red lines".
Since the three red lines are specially set up for real estate enterprises, whether a real estate enterprise pays attention to these three indicators or not, you can basically understand the approximate.
The figure above shows Vanke's operating income and net profit from 2012 to 2021, and it can be seen that its operating income increased by 100 billion yuan in 2012 and then increased every year.
By 2021, the operating income reached 452.798 billion, which is relatively stable from the trend of operating income.
At the same time, it also shows cyclicality, which can be inferred from the wavy shape of the operating income growth curve.
From the perspective of net profit, net profit basically accounts for about 10% of operating income, and in 2021 it was the first negative growth.
The main reason is that in the case of the overall market downturn and the epidemic factor, the overly optimistic operation has brought about a decline in profit margins and asset impairment losses.
However, it is still understandable behavior, and investment in this area will increase returns under the conditions of the liberalization of the epidemic and policy easing.
The figure above shows Vanke's gross profit margin and return on net assets from 2012 to 2021, and it can be seen that the trends of these two curves are basically consistent.
It remained flat in 2016 and before, with gross margin basically remaining around 30% and ROE remaining around 20%.
There was a small increase in 2017-2018, reaching a climax in the short term, then began to decline, and in 2021 there was a significant decline.
In 2021, the gross profit margin is only 21.82%, and the return on net assets is only 9.78%, in fact, it is also due to the inertia of high growth, and it is difficult for the ship to turn around, especially the superimposed policy deleveraging and epidemic factors.
On the one hand, land acquisition funds are growing due to fierce competition, and on the other hand, house prices have fallen due to economic recession and deleveraging.
However, these will make the short-term impact slightly greater, and in the long run, easing policies have been gradually introduced, which will play a role in maintaining stability in the real estate industry in the future.
Since its listing in 1991, Vanke's A-share dividends have accumulated 83.379 billion yuan, and the pre-tax dividend rate in 2021 is 5.87%, which can be said to be among the best in the A-share market.
In 2021, the pre-tax dividend rate of Kweichow Moutai is 1.07%, the pre-tax dividend rate of Changjiang Power is 3.45%, the pre-tax dividend rate of China Shenhua is 7.59%, and the pre-tax dividend rate of China Merchants Bank is 4.17%.
With such an example, everyone probably knows it.
Vanke's total financing in the capital market is 14.133 billion yuan, and the company's development mainly relies on interest-bearing liabilities.
In terms of financing costs, Vanke's financing balance in banks is 149.3 billion yuan, the financing cost is not more than 5.88% higher than the interbank lending rate, and the bond financing balance is 57.98 billion yuan, and the financing cost does not exceed 5.35%.
The average financing cost of new financing in the first three quarters of 2022 is 3.7%, which has financing advantages.
4. Industry analysis
In 1998, the urban housing system was reformed, the physical distribution of housing was stopped, and the commercialization of housing was accelerated, after which real estate began to enter a boom period.
From 1999 to 2021, the compound annual growth rate of commercial housing sales amount and sales area was 21% and 12.5%, respectively.
However, since the proposal of housing and living in 2016, it has gradually begun to cool down the hot real estate.
In 2020, three red lines for real estate developers were introduced, and the new crown epidemic broke out, which caused the real estate industry to suffer an unprecedented blow in history.
In this process, there have also been incidents of debt thunderstorms of real estate development enterprises such as Wanda, Evergrande and Jinke.
The reason is that it is overdeveloped at a high level, entering a vicious circle of excessive debt, sudden cooling leading to difficult collection, tight cash flow, increased bad debts, and reduced loan capacity, and the industry has accelerated its liquidation.
However, state-owned real estate development enterprises such as Vanke, China Resources, Poly and Greentown still maintained a growth of more than 10% in the environment of the industry downturn.
The entire real estate industry has been reshuffled through deleveraging, forming a new layout of national advancement and retreat.
As of November 30, 2022, the balance of domestic defaulted bonds in the real estate industry reached 160.3 billion yuan, accounting for 27% of the entire industry, which means that nearly one-third of real estate bonds have defaulted.
In July 2022, more than 80 real estate projects in Henan, Jiangxi, Shanxi, Hunan, Hubei and other cities experienced a loan suspension storm. The reason is that the developer has no money to build a building, and some of it has become a rotten building, so the owner stopped repaying the mortgage, which aggravated the industry crisis.
But real estate has always accounted for the majority of China's economy.
In the first three quarters of 2022, the actual GDP growth rate was 3%, which did not reach the 5.5% target set in the government work report at the beginning of the year, of which real estate development investment fell by nearly 10 points, and consumption was relatively weak, which dragged down the entire GDP.
On November 8, 2022, the People's Bank of China provided financial support of about 250 billion yuan in re-loans to support private enterprises in issuing bonds and financing through direct purchase of bonds, guarantee credit enhancement, etc.
Vanke, Greentown and others applied for registration of the financing model, with a total scale of 160 billion. On November 23, 2022, the central bank and the China Banking and Insurance Regulatory Commission officially issued the Notice on Doing a Good Job in the Current Financial Support for the Stable and Healthy Development of the Real Estate Market, which is the sixteenth article of finance, and the disclosed intentional credit limit exceeds 4 trillion yuan.
On November 28, 2022, the CSRC decided to adjust and optimize five measures in equity financing, including the following:
Resumption of mergers and acquisitions and supporting financing of listed companies involved in real estate; Resumption of refinancing of listed real estate enterprises and listed real estate companies; Adjust and improve the listing policy of real estate enterprises in overseas markets; Further play the role of REITs in revitalizing the stock assets of real estate enterprises; Actively play the role of private equity investment funds, etc.
It probably means helping real estate companies raise funds in the capital market.
V. Summary
After 15 consecutive months of continuous decline, there is finally hope for recovery.
However, the market recovery process will not be fast, and this will take time to take slowly.
After the epidemic is released, the most important thing is the economic problem, and it will take some time for the recovery of residents' economy or consumption mentality, so the market still needs to wait patiently.
Through comprehensive analysis, Vanke has an ideal price of 17 yuan in my trading system.
In addition, I made the following table, a table of A-share core asset research summary, which selects hundreds of high-quality leading companies and attaches tens of thousands of words of analysis methods.
In the future, all the analyzed companies will update the data in the above table, and in the future, every weekend will make an in-depth summary of the companies analyzed this week, and the weekly summary will also be put together with the table.
Every time after analyzing the company, some more in-depth views or calculation methods will be added later, and they will also be put together for easy reading, remember to read.
Focus on listed company financial reports and fundamental in-depth analysis.
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