Investment advisory support|Yu Xiaoming, editor|Gu Jinfeng
Source: Jufeng Investment Advisory, Good Stock Application
Since the end of April, Beijing, Shanghai, Tianjin, Shenzhen, Hangzhou, Xi'an, Chengdu, Nanjing and other places have been intensively optimizing the property market. With the support of a series of policies, the activity and transaction volume of the real estate market in many places have further warmed. The purchase restrictions in first-tier cities have been relaxed, and in second-tier cities, purchase restrictions have been fully lifted, mortgage interest rates have been lowered, and the cost of buying a house has been continuously reduced. Today, let's take a look at the company's investment logic.
The central government's easing policies are frequent, and purchase restrictions in non-core cities are fully liberalized
At the central level, since 2024, the five-year LPR has been sharply reduced by 25BP, the real estate financing coordination mechanism has been continuously promoted, and the Politburo meeting proposed to study the policy measures to digest the stock of real estate and optimize the incremental housing, and pay close attention to building a new model of real estate development. At the local level, since the second half of 2023, the purchase restrictions in first-tier cities have been relaxed, and in second-tier cities, purchase restrictions have been fully lifted, mortgage interest rates have been lowered, and the cost of buying a house has been continuously reduced. At the enterprise level, operating property loans can be used to repay loans, and the project financing whitelist is progressing smoothly.
Hangzhou and Xi'an have successively issued new policies to completely cancel housing purchase restrictions
On May 9, the Hangzhou Municipal Bureau of Housing Security and Real Estate issued the "Notice on Optimizing and Adjusting the Real Estate Market Regulation and Control Policy", and the Xi'an Municipal Bureau of Housing and Urban-Rural Development and other departments jointly issued the "Notice on Further Promoting the Stable and Healthy Development of the Real Estate Market". Among them, the key points of Hangzhou's notice include: 1) proposing to completely cancel housing purchase restrictions and no longer review housing purchase qualifications; 2) For new commercial housing projects, the number of registered households with the intention to purchase houses is less than or equal to the number of quasi-sales, and the lottery will no longer be conducted; 3) Strengthen housing credit support, if the buyer does not have a house within the urban area of the purchased housing, or has only one house within the urban area of the purchased housing and is being put up for sale, the mortgage loan for the newly purchased housing can be recognized as the first house; 4) Non-registered persons who have obtained legal property rights in the city can apply for settlement. With the release of Hangzhou's "5.9" new policy, the number of new listings of second-hand houses has increased significantly. According to the data of the Shell Research Institute, compared with the daily average in April, the number of second-hand housing inquiries on the first day of the new deal increased by 54%; The number of new purchases of second-hand houses increased by 91%; The number of new home inquiries increased by 96%.
The complete lifting of purchase restrictions in many places may lead to further optimization of housing policies in the remaining areas
According to the statistics of China Real Estate Network, as of May 9, after Hangzhou and Xi'an fully lifted the purchase restrictions, 24 cities have completely canceled the purchase restrictions. At present, there are only 7 remaining areas that have not fully lifted the purchase restrictions, mainly in first-tier cities, including Beijing, Shanghai, Shenzhen, Guangzhou, Tianjin, Zhuhai Hengqin District, and Hainan Province. We believe that with the successive and complete lifting of purchase restrictions in various places, and the Politburo meeting held on April 30 mentioned "co-ordinating the study of measures to digest the stock of real estate and optimize the incremental housing", it may drive the regions that still adopt purchase restrictions to further optimize their real estate policies.
The sales and land acquisition data are under pressure, and the competition in the first- and second-tier markets is intensifying
Sales side: The cumulative sales area and value of the top 100 real estate companies in 2024Q1 decreased by 50.7% and 49.1% year-on-year respectively, and the decline has continued to expand since June 2023, and the market share of the top 100 real estate companies fell from a high of 82.0% to 39.6% in the first quarter. In 2023, the sales amount of leading real estate enterprises will decline by more than half, and the cumulative sales amount of Yuexiu Real Estate and C&D International will increase by more than 10% year-on-year; In 2024Q1, the sales decline of leading real estate enterprises expanded, and the sales of sample real estate enterprises decreased year-on-year, and the overall sales performance was local state-owned enterprises> central enterprises> mixed-ownership enterprises> private enterprises.
Land: In 2023, the cumulative construction area and value of residential land transactions in 100 cities of the Bureau of Statistics will decrease by 30% and 25% year-on-year, respectively. Since the second half of 2023, all cities have successively liberalized the double-limit policy for land auctions, adopting the method of bidding for those with the highest price, and the core second-tier cities have frequently released land auction kings, leaving only Beijing, Shanghai and Shenzhen to retain the double-limit policy for land auctions, and the main city of Hangzhou to retain the price limit for new houses. In 2023, the overall ratio of land acquisition equity of leading real estate enterprises will show an increasing trend, and the investment strategies will converge, with investment in first- and second-tier cities accounting for more than 90%. Five real estate companies have acquired land with an amount of more than 100 billion yuan, and C&D International and China Overseas Land & Investment have the characteristics of fast sales growth and strong land acquisition, and are optimistic about the continuous increase in market share in the future.
The performance of real estate companies is less than expected, and real estate valuations are in the historically low range
From the perspective of the financial performance of real estate companies, only 4 of the top real estate companies with profitable performance in 2023 will maintain double growth in revenue and net profit attributable to the parent company. Under the downward pressure of sales, most real estate companies are under pressure on the gross profit margin of project carryover, the pressure on inventory impairment increases, and the profitability is under pressure year-on-year. At the same time, the debt of the leading real estate enterprises continued to be optimized, the overall pressure of interest-bearing liabilities decreased, and the financing cost decreased. According to the holdings of the real estate sector in 2024Q1, the real estate allocation ratio is 0.86% (0.97% in 2023Q4), and the PB valuation is in the historically low range.
Today, let's take a look at the company's investment highlights:
1. The company is a leading comprehensive development and operation service provider of cities and parks in China.
2. Focusing on the three major businesses of development business, asset operation and urban services, the company has gradually accumulated unique advantages in many fields.
3. The company's sales increased slightly against the trend, with regional focus, remarkable results in urban deep cultivation, an increase in the proportion of project equity, a high increase in annual performance, a significant reduction in financing costs, and an increase in the rate of return on holding properties.
As the flagship enterprise of the comprehensive urban development and operation sector of China Merchants Group, China Merchants Shekou Company adheres to the characteristics of "industry and finance innovation, low-carbon pioneer, and stable operation", provides comprehensive solutions for urban development and industrial upgrading, and is committed to becoming a "bearer of a better life".
Introduction and main business of China Merchants Shekou
China Merchants Shekou Focusing on the three major businesses of development business, asset operation and urban services, China Merchants Shekou has gradually accumulated unique advantages in many fields: in terms of development business, China Merchants Shekou is an expert in comprehensive development, a pathfinder, practitioner and leader in green human settlements. In terms of asset operation, it covers the operation and management of assets in industrial parks, centralized commercial, office, hotels, apartments and other formats. In terms of urban services, it covers property management, cruises, exhibitions, health care and other businesses.
The concept of China Merchants Shekou stocks
Broken Net Shares, Reform of Central Enterprises, Guangdong Sector, Real Estate Development, HS300_, Shenzhen Special Economic Zone, Institutional Heavy Position, Shenzhen Component 500, Margin Trading, Pension Concept, Guangdong-Hong Kong Free Trade, State-owned Enterprise Reform, Belt and Road, Securities Holdings, SZSE 100R, Shenzhen Stock Connect, Xiong'an New Area, MSCI China, Leasing and Selling Equal Rights, FTSE Russell, Standard & Poor's, Tax-free Concept, REITs Concept.
What is the status of China Merchants Shekou in the industry?
In terms of operating income, China Merchants Shekou is higher than the industry average, ranking 4th in the industry.
What is the basic situation of China Merchants Shekou's stock issuance?
The total share capital of China Merchants Shekou is 9.061 billion shares, of which 8.323 billion A shares are outstanding. As of May 14, the total market value was 89.974 billion yuan, the circulating market value was 82.643 billion yuan, and the price-earnings ratio was 14.1. The number of shareholders is 80,600. The largest shareholder is China Merchants Group Co., Ltd., with the top ten shareholders accounting for 70.64% of the shares.
What about the financial data of China Merchants Shekou stock?
According to the first quarter report of 2024, the total revenue of China Merchants Shekou was 23.747 billion yuan, and the net profit attributable to the parent company was 332 million yuan, with a year-on-year increase of 58.22% in total revenue and a year-on-year increase of 22.22% in attributable net profit.
As of December 31, 2023, the operating income of the development business was 153.957 billion yuan, and the operating income was 87.97%.
Executive profiles
Jiang Tiefeng: Male, senior engineer. He graduated from Huazhong University of Science and Technology with a bachelor's degree in architectural engineering and later studied at Tsinghua University with a master's degree in engineering. Successively served as assistant to the general manager, deputy general manager and general manager of China Merchants Real Estate Nanjing Company; General Manager of the Company's Shanghai Branch, Executive Deputy General Manager of East China, General Manager of East China Region, and General Manager of Jiangnan Region; Deputy General Manager and General Manager of the Company.
The company recently released its 2023 annual report, with annual operating income of 175.01 billion yuan, a year-on-year decrease of 4.4%; The net profit attributable to the parent company was 6.32 billion yuan, a year-on-year increase of 48.2%.
The impairment decreased, the proportion of project equity increased, and the annual performance achieved high growth
In 23 years, the company's revenue decreased by 4.4% year-on-year, and the net profit attributable to the parent company increased by 48.2% year-on-year, and the performance growth rate was significantly higher than the revenue growth rate, mainly due to: 1) the company's impairment pressure decreased, and the asset impairment and credit impairment losses in 23 years were 2.42 billion yuan, a year-on-year decrease of 62.6%, of which the asset impairment was 2.28 billion yuan (-55%), and the credit impairment was 140 million yuan (-90%); 2) The proportion of equity in carry-over projects increased, and the proportion of minority shareholders' profit and loss in net profit decreased by 22.5pct to 30.6% on the basis of a slight year-on-year increase in net profit in 23 years.
Sales increased slightly against the trend, and regional focus and urban deep cultivation achieved remarkable results
In the past 23 years, the company has achieved a total contracted sales area of 12.23 million square meters (+2.49%), and a contracted sales amount of 293.6 billion yuan (+0.35%), ranking among the top five in the industry. The company's sales in 13 cities ranked among the top 5, of which Shanghai, Suzhou, Hefei, Changsha and Nantong ranked TOP1. In terms of land acquisition, in 23 years, the company acquired 55 land plots, with a total construction area of about 5.9 million square meters, a total land price of about 113.4 billion yuan, and a land acquisition equity ratio of 76%, which was significantly higher than before. The company's investment in Beijing, Shanghai, Guangzhou and Shenzhen accounted for 51% of the total investment, providing support for future sales decentralization.
Financing costs have been significantly reduced, and the rate of return on holding properties has increased
In 23 years, the company's asset-liability ratio excluding advance receipts was 62.4%, the net debt ratio was 54.6%, and the cash short-term debt ratio was 1.28. The company gave full play to its credit advantages to carry out high-interest debt replacement, and the cost of funds was significantly reduced, and the coupon rate was the lowest level of the bond interest rate of real estate enterprises in the same period, and the annual comprehensive cost of funds was 3.47%, a decrease of 42BP from the beginning of the year. The company's asset operation business grew steadily, with a full-caliber asset operating income of 6.691 billion yuan (+17.2%) in 23 years; Achieved RMB EBITDA33 million (+8.6%), of which the return on EBITDA for projects in the mature operation period (three years or more) reached 6.24% (+0.5pct). In 23 years, the company took the second phase of the accelerator project of China Merchants Guangming Science and Technology Park as the underlying asset, and implemented the REIT expansion of Shekou Industrial Park, with an issuance scale of 1.244 billion yuan, which was listed in June 23. In the future, the existing park assets are expected to be loaded one after another to accelerate the return of funds.
Investment opportunities
Orient Securities believes that the target price will be adjusted to 12.88 yuan. According to the company's 23 annual report, the forecast of sales growth, gross profit margin and expense ratio was adjusted, and the adjusted EPS forecast value for 24-25 years was 0.92 and 1.03 yuan (the original forecast for 24-25 years was 1.11/1.45 yuan) and the 26-year EPS forecast value was 1.13 yuan. Referring to comparable companies, the company is given 14 times PE in 24 years, corresponding to a target price of 12.88 yuan.
Enlightenment Today
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Risk Warning
macroeconomic downside risks, the real estate industry recovery is less than expected; Statistical samples bring data differences.
source
Shanghai Securities-Building Materials Industry Weekly: The cancellation of comprehensive purchase restrictions in various places has driven the rebound of the real estate chain - 20240515
Orient Securities-China Merchants Shekou-001979. SZ - high performance, project equity ratio increased - 20240501
China Galaxy-China Merchants Shekou-001979. SZ-2024 Q1 Report Comments: Revenue Increases Rapidly, Investment Focuses on Core-20240430
(Investment advisory support: Yu Xiaoming, practicing certificate: A0680622030012)
Disclaimer: The above content is for reference only and does not constitute specific operation advice, and you shall operate at your own risk and profit and loss