Author | Yang Guanya
As we all know, 2020 was the year of disillusionment in real estate myths. Global inflation, repeated epidemics, frequent thunderstorms by large housing enterprises, the scale of land transactions fell sharply, and the transaction scale of commercial housing fell by nearly 30% year-on-year. As of April this year, at least 10 listed real estate companies have issued trading suspension announcements. The real estate industry is undergoing a period of deep adjustment, with the market scale continuing to shrink and market differentiation becoming more and more obvious.
On March 31 this year, the veteran real estate enterprise Xincheng Holdings released its 2022 annual report. Under the great changes in real estate, Xincheng Holdings handed over an answer sheet that barely maintained profitability despite a sharp decline in performance, which can be regarded as a real estate company that is still "on the shore" compared with Evergrande, which has a debt of trillions.
This is not the first time Metro Holdings has suffered a crisis. In 2019, Xincheng Holdings was negatively affected by Wang Zhenhua's case, word of mouth and market value fell sharply, Wang Zhenhua's son Wang Xiaosong was ordered to take over Xincheng Holdings, although Xincheng Holdings has gone through the darkest moment, but has not returned to the peak moment of the top ten real estate enterprises.
However, in today's real estate market, for real estate companies, "stability" is much more important than "brilliant".
Hundreds of billions of housing enterprises, profits have both declined
According to the 2022 annual report of Xincheng Holdings, the revenue of Xincheng Holdings last year was about 115.46 billion yuan, a year-on-year decrease of about 31.4%; Operating profit was about 3.03 billion yuan, down 83.4% year-on-year, net profit was 1.56 billion yuan, down 88.5% year-on-year, net profit attributable to owners was 1.39 billion yuan, down 88.9% year-on-year, and net profit attributable to non-parent (core profit attributable to parents) was about 730 million yuan, down 92.9% year-on-year.
In the general environment, there are fewer people buying houses, and the decline in revenue is a dilemma faced by every housing company. Regarding the sharp decline in performance, Xincheng Holdings said that due to the overall market environment and structural changes in carry-over projects, the carry-over income and gross profit of the company's real estate projects during the reporting period decreased significantly compared with the same period of the previous year. In addition, due to changes in market conditions, the Company's asset impairment provision increased year-on-year.
In 2022, the amount of impairment provisions for various assets of Xincheng Holdings increased again, reaching 6.399 billion yuan. Among them, a provision of $432 million for bad debts and a provision for inventory declines of $5,966 million. The large provision for asset impairment resulted in a decrease of RMB4.237 billion in net profit attributable to shareholders of listed companies in 2022. However, from the perspective of the general environment, most housing companies have made impairment provisions.
As a "residential + commercial" two-wheel drive real estate enterprise, Xincheng Holdings contributed about 9.22 billion yuan in commercial revenue last year, an increase of 15.75% year-on-year (as of the end of last year, the book value of self-owned commercial investment real estate reached 115.93 billion yuan), and the operating income of property leasing and management reached 9.224 billion yuan, an increase of 15.75% over the previous year, mainly due to the increase in the number of Wuyue Plaza opened by the company; Lagging behind was real estate development, which fell 33.7% year-on-year, with revenue of 104.88 billion yuan.
Since 2012, Changzhou Wujin Wuyue Plaza and Changzhou Wuyue International Plaza have been unveiled one after another, opening the road to pursue the dream of the commercial module of Xincheng Holdings. The main business of Metro Holdings has also extended from residential real estate development business to commercial real estate development business. The main products of the commercial real estate development business are commercial complexes, including sales properties and holding properties. Among them, sales-oriented properties are sold to the outside world, mainly including residences, serviced apartments and shops along the street; Owned-type properties are self-owned or leased, mainly shopping malls.
As of the end of the Reporting Period, Xincheng Holdings has laid out 194 Wuyue Plazas in 140 cities across the country, with 145 openings and entrusted management in operation, with an opening area of 13,197,400 square meters and a occupancy rate of 95.13%. During the reporting period, the company achieved a total income of 10.006 billion yuan from commercial operations, that is, rental income including tax (including rent, management fees, parking lots, diversified operations and other sporadic management fee income of shops, office buildings and shopping centers), an increase of 15.82% year-on-year.
Judging from the annual report, the commercial sector of Xincheng Holdings is the main contributor to maintaining profits, but to support the scale of the entire Xincheng Holdings, the sector still needs to be developed.
Under the cold winter of real estate, the slowdown of Xincheng Holdings is inevitable, and it may take some time to return to the top ten in the country.
The second generation of real estate that does not stop "fighting fires"
Wang Xiaosong, the current head of Xincheng Holdings, was born in December 1987 and graduated from Nanjing University in July 2009 with a major in environmental science. In 2018, Wang Xiaosong served as president of Xincheng Holdings. In 2019, he became the chairman of Metro Holdings.
A smooth resume, the son of the chairman, the second-generation successor who intends to cultivate... The young Wang Xiaosong carries a lot of "responsibility" and "aura". However, since the "sudden" takeover, Wang Xiaosong has become the "fire captain" of Xincheng Holdings again and again.
Wang Xiaosong's more than three years in power have also been bloody years for China's real estate, but Xincheng Holdings not only persevered in the cold wind, but even completed the target of hundreds of billions of yuan, what did he do?
When it comes to Metro Holdings, one has to mention the negative case of the former chairman four years ago. In 2019, Xincheng Holdings emerged from the encirclement of real estate enterprises as a "dark horse", ranking the industry from more than 20 in the previous year to 8th among the top 100 real estate enterprises. Unfortunately, due to the impact of the incident of former chairman Wang Zhenhua, the image, market capitalization, reputation, and financing channels of Xincheng Holdings have been devastated. Before the accident, Xincheng Holdings took more than 60 billion yuan of land in the first half of the year, but only 4.4 billion yuan after the accident.
And Wang Xiaosong was the one who succeeded Xincheng Holdings at that time, and the atypical succession made him need to take Xincheng Holdings to save himself as soon as he took office. For example, quickly cut off with Wang Zhenhua, sell assets to reduce liabilities, slow down land acquisition and reduce scale, and so on. Metro Holdings, which stabilized its cash flow, achieved double-digit elevations in major indicators in 2019, passing the darkest moment.
Wang Xiaosong, a new official, completed his first firefighting.
In 2020, Xincheng Holdings, which stepped on the brakes, faded its "dark horse" nature, its sales fell by 14%, and its industry ranking fell to 12th. That is, from this year, the real estate bubble became more and more obvious, and the industry continued to decline. In 2021, the three red lines pressed down, and countless housing companies fell into the debt crisis. Wang Xiaosong believes that under the regulation, resources will gradually be concentrated and tilted to the head housing enterprises, and the future competition will be more about the management ability of housing enterprises.
As a result, from 2021 to 2022, Wang Xiaosong made at least five organizational restructurings, aiming to streamline departments and control costs. At the end of 2021, Xincheng Holdings entered the ranks of "green file" real estate enterprises. Among them, the company's net debt ratio was 48.12%, the asset-liability ratio after excluding advance receipts was 69.95%, and the cash-to-debt ratio was 1.07. This year, Xincheng Holdings' revenue increased by 15.6% year-on-year, and its stock price once rose to an all-time high.
Entering 2022, in the storm of dynasty change in the real estate industry, some housing companies have been eliminated, some housing companies have stood out, and some housing companies are still saving themselves. Metro Holdings belongs to the third category.
Wang Xiaosong is still continuing to "put out fires".
Wang Xiaosong likes to compare Xincheng to camels, he believes: "Camels can walk the longest road in the toughest environments, lion cheetahs are amazing explosive in short periods of time, but lack the ability to survive continuously in harsh environments." ”
2023 is the 30th anniversary of the establishment of Xincheng Holdings, Wang Xiaosong did not set a clear sales target for the company, but said in the annual report: "Xincheng will continue to work together, cross the cycle, strengthen confidence, and forge ahead." ”
Whether it is safe or not is still unknown
Is Metro Holdings really safe to survive 2022?
For most housing companies at present, "scale" has long been not the focus of development, "debt repayment" is.
As of the end of the reporting period, the asset-liability ratio of Xincheng Holdings was 80.46%, a slight decrease of 1.66% compared with 81.82% in 2021, but it was still at a high level. As of the end of 2022, the current ratio and quick ratio were 0.96% and 0.24%, respectively, which was further reduced from the end of 2021, and the current ratio fell below 1%. It shows that the current capital withdrawal of Xincheng Holdings is still slow, and the capital chain is still under pressure at all times.
However, in the past two years, the loan repayment rate and interest repayment rate of Xincheng Holdings have been 100%. At the end of last year, Xincheng Holdings paid off the year's debts a month in advance, buying the company a month of easy time. As of the end of 2022, Xincheng Holdings had a cash balance of 31.463 billion yuan, with abundant cash on hand; the company's net operating cash flow was 14.535 billion yuan, and the operating cash flow was positive for five consecutive years.
From now on, Xincheng Holdings, which bought houses and sold projects four years ago due to emergencies, has saved a lot of materials to survive the cold winter. Despite the decline in overall performance in 2022, Wang Xiaosong still expressed his gratitude to the major regions at the annual summary meeting - just because Metro Holdings was lucky not to have a thunderstorm.
But no thunderstorm does not equal safety. In the past year, Xincheng disposed of some non-core assets in the throes, reduced the size of the team, basically stopped investment, and used Wuyue Plaza as the underlying asset to expand financing channels. Last year, Xincheng Holdings used Wuyue Plaza to make more than 4 billion yuan of operating loans, and Wuyue Plaza played an important role in the stall of whether the company will thunder, because a large part of the money used by Xincheng Holdings to repay debts comes from the operating loans of Wuyue Plaza.
At the same time, last year, Xincheng Holdings stopped land acquisition, Wang Xiaosong is very cautious about asset-heavy investment, and began to stop all investments in early 2022 to ensure the stability of the capital chain.
In addition to repaying debts, Xincheng Holdings also faces another problem - destocking, which is also a common problem faced by real estate companies on the market. The balance sheet of Xincheng Holdings shows that nearly seventy percent of current assets are inventory, amounting to 204.365 billion yuan. Inventory is the reserve grain for the scale development of real estate enterprises, and it is also the foundation for the future profitability of real estate enterprises. Although compared with the asset volume, revenue scale and inventory scale of real estate enterprises, the loss of inventory price decline seems to be a drop in the bucket, but it actually plays an important role in the company's profitability.
In the future, Metro Holdings will basically not change the two development directions of commercial and residential. At the 2023 internal annual meeting of Xincheng Holdings, Wang Xiaosong listed three important tasks this year: the first is asset-light construction investment expansion, the second is debt repayment, and the third is to ensure delivery.
Wang Xiaosong once said at an internal meeting of the company, "There is not a winter that will not pass, and there is not a spring that will not come." "However, through this long winter, Metro Holdings seems to have a long way to go.
Resources:
Girlfriend Finance: "The big dark horse of real estate enterprises in 2022 net profit fell by 90%!" The second generation of Xincheng Holdings is still "fighting fires"
City boundary: "The second half of the 35-year-old head of Xincheng Holdings"
Investor Network: "Xincheng Holdings 2022 Annual Report: "Demonstration Housing Enterprises" Through the Cycle of Attack and Defense
Miss Dong: "Miss Dong | Insiders talk about the situation of Xincheng Holdings"
Deep Water Finance and Economics: "Xincheng Holdings: Over the Hill, or Over the Hill"
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