Yang Jian of Zhongliang Holdings: "Investment for position" has been effective, and monetary policy in the second half of the year is tight

After unloading the historical burden, Zhongliang, who was once a "real estate dark horse", continued to sit in the top 20 positions in the sales scale of national housing enterprises this year.

On August 25, Zhongliang Holdings (02772. HK) held its 2021 interim results meeting, which was attended by Yang Jian, Chairman and Executive Director of Zhongliang Holdings, Chen Jian, Executive Director and Co-President, Chen Jian, Executive Director and Co-President, and You Sijia, Executive Director and Co-President and Vice President.

China's real estate industry is in danger. At the performance conference, Yang Jian said that in the first half of this year, China's real estate rebounded from the low level of the same period last year, but the real estate regulation and control policy was gradually strengthened, and the real estate industry was tight on liquidity and even debt default. He believes that in the future, national policies will be more inclined to metropolitan areas, and structural opportunities will appear in cities with potential in the circle.

Good at investment layout in the middle of the liang, "investment for position" has been effective, investment strategy has moved from "expansion" to "deep ploughing", sales in the first half of the year to recover the momentum is good, the first 7 months of sales have exceeded 100 billion. However, Yang Jian expects that monetary policy will remain tight in the second half of the year, and the real estate market will be full of challenges.

In another way, expand diversification

Four years later, Zhongliang Holdings crossed the 100 billion mark and completed the annual target of 180 billion yuan this year, with little suspense. According to statistics, in the 1 to 7 months of this year, Zhongliang Company achieved sales of 100 billion yuan, and the annual target completion rate reached 107 billion yuan.

Among the 20 largest real estate enterprises in Zhongliang Holdings, the sales growth rate ranked first, and the contract sales in the first half of the year reached 95 billion yuan, an increase of 40% year-on-year.

Due to the forward-looking and accurate layout in the second-tier cities and the third- and fourth-tier cities in the Yangtze River Delta, the average project dematerialization rate of Zhongliang Holdings in the first half of the year reached 70%, the collection rate was 85%, and the average sales price was 12,600 yuan per square meter, which was 12,500 yuan / square meter higher than last year, and the average sales price of Zhongliang Holdings in the first half of the year was 70%. Gross profit was 20.8%, basically the same as last year.

The investment in land has become the killer of Zhongliang Holdings, and the hard work of "using thousands of people to study 10,000 pieces of land" has enabled this year's sales to grow steadily.

He Jian, co-president, said that the high de-escalation of the project is inseparable from Zhongliang's accurate investment positioning and efficient operation execution. Zhongliang has always adhered to the national layout and deeply cultivated the urban circle, and sold more than 300 projects in more than 140 cities in the first half of the year. At present, Zhongliang Holdings ranks among the top ten in the industry in terms of sales in more than 20 cities, and the sales of the top 20 cities account for 50% of the group's contract sales. As far as the contribution of cities is concerned, it is mainly manifested in the Yangtze River Delta and the central and western regions with good economic foundation and rapid development, accounting for 58% and 22% respectively.

The urban layout strategy is inseparable from the rise of the middle beam. From 2015 to 2016, China's real estate began to "implement policies due to the city", and the property market in second-tier cities was suppressed by policies, while Zhongliang mainly laid out third- and fourth-tier cities and ate the dividends of shed reform. Since the middle of 2018, Zhongliang has resolutely "changed warehouses" and turned to second-tier cities, provincial capitals, and metropolitan area centers. Today's sales can be said to have increased, confirming the success of Zhongliang Investment's "swap" strategy.

According to He Jian, the original heavy positions in the middle beam and the third and fourth lines have continued to improve the energy level of urban investment, and the investment in second- and third-tier cities has reached 89%, while third- and fourth-tier cities account for 25%. From the perspective of economic regions, the total land investment in the Yangtze River Delta region accounts for 51% of the total investment, the central and western regions account for 18%, the west coast of the Straits 12%, the Bohai Rim 10%, and the Pearl River Delta 9%. By the first half of 2021, Zhongliang's full-caliber land reserve area is about 6600 square meters, and the average cost of soil storage is about 4400 yuan / square meter, covering 155 cities, and the scale of soil storage is constantly expanding.

In terms of sales resources, the total saleable soil storage area is 41.8 million square meters, and the total saleable soil storage value is 500 billion yuan, providing sufficient saleable value for future sales growth. In the first half of 2020, Zhongliang's full-caliber land acquisition volume reached 40.8 billion yuan, the value of new goods was 102 billion yuan, and 67 new projects were started, with an average land acquisition premium rate of 25%.

In the first half of this year, 22 hot cities implemented centralized land supply, and the overall soil auction was very hot, but Zhongliang took a different path to avoid some overheated centralized land supply cities. Chairman Yang Jian said that Zhongliang's dependence on centralized land supply cities is not high, for now, basically about 20%, in terms of investment, it is also necessary to strictly manage investment, and will not buy projects with too high costs or fierce competition, which does not meet the company's investment standards.

He said that Zhongliang will further expand diversified investment and increase high-quality land reserves in the form of industrial cities, commercial and acquisitions, reaching 25% in terms of diversified land acquisition.

CFO You Scarlett believes that the price competitiveness and price limit of the second batch of centralized land supply are not as fierce as the first batch, and we will wait and see, at present, 80% of the land is in non-centralized land supply cities, so the impact of centralized land supply on the company's risk and profit will not be too large.

Achieve a year-round downgrade, and continue to reduce debt in the second half of the year

In terms of financial data, in the overall difficult environment this year, Zhongliang Holdings has achieved the coexistence of "safety" and "profit".

In the first half of this year, Zhongliang Holdings' revenue, profit and dividends all achieved growth, and the financing cost declined for four consecutive years, further reducing to 8.3% in the medium term; the net debt ratio further decreased to 56.1%, still in the ranks of "yellow file enterprises".

"The net debt ratio for the first half of the year fell to 56.1% from 65.8% at the end of last year, mainly due to our cash withdrawal and the continued stabilization of our liabilities. In terms of the debt ratio, it was slightly increased to 79.3 per cent, and the cash short-term ratio, on a national basis, was 1.2 times the unrestricted cash short-term debt ratio. CFO You Scarlett said.

In August this year, Zhongliang participated in the "Three Red Lines" housing enterprise symposium held by the Ministry of Housing and Urban-Rural Development and the Central Bank as a representative of the "orange file". This year's junior high school Liang has been reduced to the "yellow file", is one of the few housing enterprises that can downgrade within a year.

In terms of financing structure, bonds maturing within one year accounted for 42% of the total, which was basically the same as at the end of last year, but the proportion of non-bank bonds in the first half of this year continued to be optimized to 25%.

"In the second half of the year and next year, we will do a lot of debt and stable debt work, the focus is on reducing foreign dollar debt, and we are basically ready in the second half of the year." Therefore, as we proactively address these debts in the second half of the year, we believe that by the end of this year, the company's balance sheet will still become more robust and optimized. You Scarlett said at the performance meeting.

It seems that Zhongliang is gradually fulfilling its commitment last year to "downgrade to the green file in three years".

For some rumors from the outside world, CFO You Scarlett also clarified at the performance meeting. In May, Zhongliang had the news that "commercial tickets or will expire", and the performance meeting said that the scale of Zhongliang commercial tickets was small in the industry, and as of the first half of this year, the scale of commercial tickets had dropped to about 400 million yuan. The overdue of the Zhongliang commercial ticket is a misinformation and has been paid on time. He said.

In addition, Zhongliang's equity financing is relatively large, resulting in a higher proportion of minority shareholders' equity, which You Sijia believes is related to Zhongliang's heavy position in the Yangtze River Delta. The land purchase model in the Yangtze River Delta region is generally based on bidding, auctioning and listing or mergers and acquisitions. Therefore, the degree of cooperation between real estate enterprises in the Yangtze River Delta is higher than that in other regions, including housing enterprises in the Pearl River Delta, and the cooperative rights and interests of minority shareholders account for a relatively large proportion.