Real estate industry: Jinjiu non-gold sales decline

In September 2021, TOP50 real estate enterprises achieved sales revenue of 508.3 billion yuan, down 35% from the same period last year, widening the decline of 21 pct, in August. Among them, TOP10, TOP11-30 and TOP31-50 decreased by 47%, 17% and 32% respectively compared with the same period last year.

In September, the sales of housing enterprises continued to decline, and the decline of head housing enterprises continued to accelerate. Sales of TOP50 real estate enterprises fell 35.2% year-on-year in September 2021, the third consecutive month of negative growth, and the decline further increased, 20.9 pct more than in August. Among them, TOP10 real estate enterprises fell by 47.0% year-on-year in September. If the influence of Evergrande is not taken into account, the head real estate enterprises are down 36.5% from the same period last year, which is still the largest decline compared with the top TOP11-50 real estate enterprises. While individual head housing companies still maintained positive growth in August, TOP10 turned negative in September. At present, only a small number of real estate enterprises can achieve positive growth, including Greentown, Sunshine City and other companies.

The role of land and financial regulation is beginning to emerge, and demand is further weakened. While stabilizing land prices and expectations, the land market weakens investment and speculative demand, while the limitation of the amount of housing loans lengthens the payback cycle of real estate enterprises. Under the dual policy of land and finance, market demand is further weakening, and sales are expected to continue to decline in the fourth quarter. Jin Nine in the “Golden Nine and Silver 10” has gone, and the downward sales have brought about a further aggravation of the risk of debt repayment by real estate enterprises.

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The current market environment is more favorable to the central enterprises, and the activity of the central enterprises is improved, which can be expected to be lengthened. In the previous tracking of the local market, we found that the failure rate of the second local auction increased at the same time the activity of the central enterprises increased. We expect that with the lengthening of the current sales downside fund recovery cycle and the aggravation of the financial pressure of real estate enterprises, the high probability of the third local auction market failure rate will be further. At present, the overall financing environment is more favorable for central enterprises. We calculated in the previous report that “facing up to tight policies and sustainable operation of central enterprises”. If we strictly implement capital supervision and assume a decline in sales, in extreme cases, the sales share of central enterprises and state-owned enterprises is expected to increase by at least 30%. For some high-quality central enterprises, from the perspective of DCF model, This part of the central enterprise sustainable operation brings the expected elongation, even if the short-term performance has the risk of decline, but there is room for valuation repair.

Under the weak supply and demand, the certainty of real estate investment is declining, and the market is still dominated by the game. At present, the fundamentals of the industry are still in the process of bottoming out. In the review of the semi-annual report, we calculated that if housing companies can maintain their current profit margins and interest-bearing liabilities are in a state of slight contraction by borrowing the new to repay the old, it is expected to achieve three all-green in mid-2023, and if settlement is accelerated as soon as possible, it will reach the target by the end of 2022 at the earliest. Although the decline in sales growth has little impact on short-term performance, there are still expectations of policy relaxation given the certainty of a downward trend in real estate investment in 2022. Short-term policy game, recommend Hong Kong stocks of China Jinmao, Fuchuang China, benefit from Xuhui Holdings Group, A-share recommended Zhongnan Construction, Vanke A, Poly Real Estate, Jindi Group, Merchants Shekou, etc., real estate agents, benefit I love my family, at the same time recommend the property sector, including China Shipping property, Baolong Commerce, benefit from investment surplus, country Garden services.

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Risk hint: the government will re-open the former financial model and then take the land financial model.

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