In the face of reports from minority shareholders in Yantai and recent border control rumors from the company's management, Vanke (000002) finally made an official response in a formal form.
On the evening of April 14, Vanke announced the relevant content of investor relations activities, explaining and clarifying a series of recent rumors surrounding the company, including the entanglement between Yantai Company and minority shareholders, Xiao Jin, general manager of Jinan Vanke, being taken away by the public security organs, and Vanke's senior management being controlled by the public security organs.
Vanke, which has always been regarded as a benchmark in the real estate industry, has so much negative public opinion, and why is the market so concerned? The root cause behind it is still in operation. At the investor exchange event on the 14th, Vanke got straight to the point, saying, "At present, Vanke has indeed encountered phased operational difficulties, and its liquidity is under pressure in the short term. ”
On the whole, on the one hand, it is the particularity of Vanke as the "last line of defense" of non-state-owned enterprises in the real estate industry, and on the other hand, it is the fact that Vanke is facing difficulties. Under the influence of these two factors, Vanke's turmoil has become a source of worry in the capital market.
The answer is that in the past few years, whether it is diversifying business or developing its main business, Vanke's "inertia" expansion strategy has encountered extreme market conditions, which has led to difficulties such as the decline in the scale of real estate sales, the lackluster diversification business, the high total debt, and the peak pressure on guaranteed delivery.
"The past cannot be admonished, but the coming can still be chased. How will Vanke solve the problem, and will it survive this round of crisis? At present, there is still no conclusion, and Vanke has a long way to go to "survive".
Business status
In terms of operation, Vanke is facing continuous decline in profits and will further decline in the future.
According to the latest annual report data, Vanke's operating income in 2023 will be 465.74 billion yuan, down 7.6% year-on-year, and the net profit attributable to shareholders of listed companies will be 12.16 billion yuan, down 10.53 billion yuan, or 46.4%, from 22.69 billion yuan in 2022. So far, in 2023, Vanke Group's net profit has decreased by 70% from the peak of 41.5 billion yuan in 2020.
At the same time, Vanke's revenue and profit margin in the next two years are expected to decline, which may lead to the continued decline in Vanke's profit scale in the next two years.
According to the data, in 2022 and 2023, Vanke's sales will be 417 billion yuan and 376.1 billion yuan respectively, which will be in a state of decline compared with 627.8 billion yuan in 2021, and this will be reflected in Vanke's financial statements in the next two years, which will be a decline in revenue scale. In addition, with the sharp decline in the scale of Vanke Group's land acquisition in the past two years, and the inventory has been consumed from 1,075.6 billion yuan at the peak in 2021 to 701.7 billion yuan in 2023, unless the real estate sales side recovers rapidly in the next two years and Vanke increases land acquisition and replenishment, Vanke's sales scale will continue to decline in the next two years. In terms of profit margin, at the performance meeting at the end of March this year, Han Huihua, head of finance of Vanke Group, made it clear that the company's gross profit margin will still face downward pressure in the next two years.
In addition, as Zhu Jiusheng said at the performance meeting in March this year, the sales scale of Vanke's development business has declined, with the sales amount falling by 9.8% in 2023, and the sales scale in the first two months of 2024 continuing to decline by more than 40% year-on-year, which has led to a continuous decline in revenue, but at the same time, Vanke will face the delivery problem of relatively large-scale sales of properties in the past in 2023, and the project expenditure corresponding to the delivery scale is not small.
In terms of solvency, Vanke is facing a sharp decrease in monetary funds and a slight increase in interest-bearing liabilities. As of the end of 2023, Vanke Group held monetary funds of RMB99.81 billion, a decrease of 27% from the same period in 2022, and as of December 31, 2023, Vanke Group's interest-bearing liabilities totaled RMB320.05 billion, a slight increase year-on-year. Among the interest-bearing liabilities, the interest-bearing liabilities due within one year are about 62.42 billion yuan, and according to the data, the monetary funds held by Vanke can also cover the short-term debts due within one year.
The adjustment of the financing model has also increased the financial pressure on Vanke.
"In the past, 90% of Vanke's financing was credit loans, and 80% of the financing headquarters could be completed by a financing team. Zhu Jiusheng said that the problem brought about by this change is that the project's funds will basically be closed in the project's regulatory account, which leads to a slight shortage of the headquarters' own cash flow, and the original cash flow reserves of the headquarters will be gradually consumed.
However, fortunately, the bank's tolerance has made Vanke's bank financing not go into a dead end. Zhu Jiusheng said that there are 26 banks that have long-term cooperation with Vanke, and in the case of declining sales in the real estate industry and reduced collection, banks are Vanke's allies in terms of risk prevention, and the cooperative banks have given Vanke 1~3 years to change time for the transformation of financing models.
In addition, in the annual report released at the end of March this year, Vanke Group put forward the goal of reducing leverage for the first time - to reduce interest-paying debt by more than 100 billion yuan in the next two years, accounting for one-third of the current interest-bearing debt. As for the way to reduce debts, in addition to suspending annual dividends and retaining operating net profits, Vanke has publicly stated that it will cash in the "reservoir" through bulk assets and equity transactions, and achieve transaction returns of no less than 30 billion yuan in 2024. As early as the second half of last year, Vanke has begun to sell assets, and has successively sold the equity of Guangzhou Tianhe Vanke Plaza, Banyan Tree Hotel, and 50% of the equity of Shanghai Qibao Vanke Plaza, with a total return of about 3.7 billion yuan.
For enterprises, it is a wise choice to deal with the assets in hand decisively to ensure the safety of cash flow, but on the other hand, the long-term investment value of Vanke will also be affected by the reduction of the assets it has cultivated for many years by handing over the operating business that it has cultivated for many years to others.
Strategic reflection
A series of operational and liquidity challenges have been intensively approached, which has made Vanke's management really start to face the proposition of "survival" put forward in 2018. "Although there are reasons for changes in the external market, it is more related to the fact that the company itself still maintains the inertia of expansion and fails to adjust in time when the macro situation and industry situation have undergone major changes. As for the reasons for the current challenges faced by the company, Vanke summed it up this way.
Specifically, "diversified business" is the first reason for Vanke's senior management to reflect.
Vanke said that although the company was the first in the industry to realize the need for transformation and development, put forward the business philosophy of "attaching equal importance to development, operation and service", and laid out a number of business service businesses and formats, there were problems of too big steps and too haste in the actual operation process. The transformation business exceeded the company's ability to match resources, occupied too much development business funds, and the scale was too large, resulting in the management ability not keeping up, and the business objectives could not be achieved as planned.
At the annual results meeting at the end of March this year, Zhu Jiusheng, president of Vanke Group, said frankly that Vanke's operating business layout is close to 400 billion yuan, but the current rate of return on operating business is not enough to cover interest. According to the data released by Vanke, the comprehensive cost of new domestic financing in 2023 will be about 3.61%, a record low, which means that overall, the yield of Vanke Group's operating properties may be less than 4%.
Looking back on Vanke's diversified business, it can be roughly divided into two rounds, the first round was in the nineties of the last century, the first decade after the establishment of Vanke, under the leadership of Wang Shi, Vanke had been engaged in feed, film and television equipment, beverages, etc., and also established the development model of "comprehensive trading company", and its business layout was in ten major industries such as import and export trade, retail chain commerce, and real estate development.
However, in 1993, Vanke decided to abandon the development model of "comprehensive trading company" and put forward the development policy of accelerating capital accumulation and rapidly forming a business scale, and established the development of urban mass housing as the leading business. In the following 20 years, Vanke devoted almost all its energy to the real estate development business, and achieved the sales target of 100 billion yuan in 2010, becoming the first real estate company with annual sales of more than 100 billion yuan.
Until 2014, Vanke started the second round of diversification after continuing to dominate the annual sales scale list of real estate companies for many years. At that time, Vanke adjusted the company's strategic positioning of "three-good residential supplier" to "urban supporting service provider", and proposed to shift from "real estate development" to "real estate development, operation and service". After the adjustment of its strategic positioning, in addition to the main business of residential real estate development, Vanke has successively laid out logistics real estate, commercial real estate, long-term rental apartments, elderly care, skiing, hotel, education, food and pig breeding and other businesses. The layout of diversified business is inseparable from the support of funds, and at that time, Vanke was indeed in the stage of abundant cash flow, and at the end of 2014, Vanke's cash short-term debt ratio was close to 3 times.
Perhaps in order to allow the rapid growth of diversified businesses, Vanke's diversified business layout has largely adopted the method of acquisition. In 2014, Vanke established a logistics real estate division to lay out logistics real estate; tested the long-term rental apartment business, and officially launched the apartment brand "Park Residence" two years later; established Meisha Education in 2015; acquired 96.55% equity of SCPG Group for 12.87 billion yuan in 2016, acquired 20 shopping malls of CapitaLand Group in Chinese mainland for 8.365 billion yuan in 2018; established the ice and snow division in 2017, and in the same year, Vanke established a joint venture platform with hotel operator Banyan Tree Group" In July 2018, Vanke invested 17 billion yuan to acquire the equity of GLP, a global logistics giant, becoming its largest shareholder.
In 2018, the fourth year after the start of diversified business layout, Vanke further upgraded its strategic positioning to "urban and rural construction and life service provider". At the same time, in September of that year, Vanke shouted the slogan of "Survival" in the industry, and it is reported that Yu Liang clearly put forward "convergence and focus" in his speech of "Survival", that is, the mismatch between input and output, the serious mismatch between risk and return, the business that has not been done for three years, and the business that still relies on the endogenous growth of Vanke's internal resources for three years should be adjusted or even not done.
However, the idea of "convergence and focus" does not mean the end of Vanke's diversified business. In 2019, Vanke established the Meisha Education Division, in 2020 the Food Division, and at the end of 2020, Vanke's Ice and Snow Division was merged into the new Hotel & Resort Division.
At the annual results meeting at the end of March 2015, Yu Liang said, "I hope that in ten years, the new business will be able to achieve a position on a par with residential housing." Now, with the 10-year mark approaching, the yield of Vanke's operating business is not enough to cover the interest, in other words, it is difficult to describe Vanke's current diversified business exploration with the word "success".
In the 2023 performance report, Vanke mentioned that the business of education is no longer in the operating business. In 2023, in addition to the property sector, Wanwuyun (02602. HK) annual revenue of more than 30 billion yuan, and 700 million yuan for Vanke, other logistics and warehousing, rental housing, commercial development and operation, hotel and resort four businesses, in 2023 can bring Vanke Group annual revenue of less than 10 billion yuan, and the profitability of these four businesses, Vanke Group has not been publicly disclosed.
In fact, as early as 2021, Yu Liang reflected: "The cost of exploring multiple tracks at the same time is greater than expected, and the development business has grown rapidly in the past, bearing the relevant costs, and after market changes, the impact of these tuition fees on performance has been revealed." ”
In the 2023 performance report, Vanke also said that although the company's ability to operate service business has made great progress, there are naturally difficulties in operating real estate with a long capital recovery cycle and large pressure, which can only be fully solved after the relevant financing mechanism matures. At present, the above-mentioned four business REITs of Vanke Group have not yet been fully opened, and only the listing of REITs has been completed commercially, and logistics and long-term rental apartments are preparing to issue REITs.
Confidence rebuilt
In addition to the imperfection of the process and results of diversified business exploration, Vanke's main business of real estate development has not escaped the inertia of rapid expansion.
"Although the company realized early in the industry that the rapid growth will eventually end, our behavior has not been able to resolutely get rid of the inertia of the industry, and in many cities, including some key cities and first-tier cities, there have been investment ventures and mistakes. After the central government clearly put forward the high-quality development goals and requirements of the industry, it failed to make a more thorough adjustment to the 'three highs' model that prevails in the industry. In this investor exchange event, Vanke listed these as two influencing factors for the company's current challenges.
The reporter noted that after 2018, Vanke did have a "deleveraging" action in fundraising activities. According to the data, in 2019~2021, Vanke's net cash flow from financing activities turned from positive to negative, which were -33.3 billion yuan, -32.5 billion yuan, and -23.1 billion yuan, respectively, and although it was positive in 2022, it only had a net inflow of 3.4 billion yuan, and in 2023, the data continued to have a net outflow of 36.8 billion yuan.
However, it is worth noting that, judging from the data on investment and land acquisition and liabilities, Vanke did not immediately "brake the car" after 2018.
According to Vanke's annual report, the amount of equity land acquisition of Vanke Group in 2018 was about 135.1 billion yuan, and in 2019, the amount of equity land acquisition of Vanke increased instead of decreasing, to 155 billion yuan, and the amount of equity land acquisition in 2020~2021 remained at a high level of 140 billion yuan, until the real estate market fell in 2022, and many 100 billion real estate enterprises defaulted on their debts, and Vanke's annual equity land acquisition amount dropped to about 50 billion yuan.
In terms of liabilities, the statistics of the wind platform show that Vanke's total liabilities increased to 1,293 billion yuan in 2018, and then in 2019~2021, Vanke's annual total liabilities rose to a new level on the basis of 2018, increasing to about 1,500 billion yuan, and it was not until 2022 that the data began to decline, falling to 1,101.9 billion yuan in 2023. In terms of interest-bearing liabilities, from 2017 to 2023, there is a gradual upward trend every year, and even after the national level proposed the new "three red lines" financing regulations at the end of 2020, Vanke's interest-bearing debt balance still increased from 258.5 billion yuan at the end of that year to 320 billion yuan at the end of 2023.
Why did it fail to stop the car? This is a proposition that the market has generally asked after Vanke's liquidity crunch has emerged. For example, Yu Liang, chairman of the board of directors of Vanke, said at the 2021 results meeting that Vanke was too optimistic about the market when the chase was still popular and the land competition was intensifying.
Perhaps, Vanke foresaw the beginning, but did not anticipate the end. Up to now, the adjustment of the property market has far exceeded market expectations, and there is no reversal signal for the time being. If Vanke's shouting of "live" in 2018 was a self-warning to be prepared for danger in times of peace, then now, "survival" has become a life and death test that has to be faced.
From the results conference at the end of March to the investor conference two days ago, Vanke's management is still actively releasing confidence in the "catastrophe", and the outside world has also paid unprecedented attention to the company's development prospects. Regarding the current predicament, Zhu Jiusheng said at the performance conference at the end of March, "I was a little confused at the beginning, but now I basically understand what to do." ”
Vanke's confidence at this time comes from many aspects, such as the strong support of the major shareholder Shenzhen Metro and even the Shenzhen State-owned Assets Supervision and Administration Commission, which is expected to gradually land tens of billions of funds, and the second is that about 400 billion yuan of operating business is in the climbing stage, and REIT and other operating project financing has been promoted.
For the company's development prospects, Zhu Jiusheng applied Li Bai's poem "The light boat will cross the triple mountain" to convey confidence to the outside world. However, on April 15, Vanke A closed at 7.14 yuan per share, and the stock price hit a new low in nearly 10 years. At least, for now, Vanke still needs to work to regain the trust of the capital market.
(This article is from Yicai)