Category: industry

Organization: Guotai Junan Securities Co., Ltd.

Researcher: Xie Haoyu / Shan GE / Hao Yawen

The readings of this report are as follows:

Effective policy inflection point appears, but more for structural and risk prevention purposes, sales growth is expected to be bottomed, but it is difficult to reverse substantially, the winning rate of the current policy game is not as good as long-term valuation repair, housing enterprises that can prolong the prospect period is a better choice.

Summary:

Sales growth showed signs of bottoming out, and residents' worries about buying houses gradually eased. 1) the sales growth rate of the leading real estate enterprises rebounded this month. Excluding risky housing enterprises, the sales area fell by 24.2% compared with the same period last year, and the sales volume dropped by 20.5% compared with the same period last month, respectively, rebounding 5.1pcts and 9.2pcts compared with last month. Compared with the sales growth rate of leading housing enterprises and the sales growth rate of the Bureau of Statistics in the past three years, during the inflection point, the data of leading housing enterprises are more sensitive, which indicates that the sales growth data basically bottomed out. 2) the weakening of house prices, the risk of house delivery and the pressure of property tax are the main factors to suppress the release of residents' demand for home purchase. The current attitude towards the relaxation of M & A loans and the default of real estate companies will reduce residents' worry about default to some extent and drive the growth rate of sales to the bottom. 3) the sharp reversal in history is mainly due to the overall relaxation of the financing side, but the current policy is not strong enough to support the sharp reversal of sales, and the current low effective inventory will also be the constraint of policy relaxation.

It is difficult for some enterprises to meet their sales targets at the beginning of the year, and the 2021 target will also be readjusted. The completion rate of the sales target in the first 10 months is only 75.7%, which is even lower than the level of the same period in 2020. Even if there is a certain adjustment in the policy, it is still difficult for some enterprises to achieve the sales target. In October, both domestic and overseas financing in the industry is at a very low level, and real estate enterprises are beginning to face more shrinking pressure. We expect that under the new shrinking table framework, real estate enterprises will consider the pace of offering, land acquisition, financing and operation in 2022. Strong operational ability will be placed in a more important position.

The land market is still deserted, but some housing enterprises have bucked the trend. The land market declined further in October, and if it is only the strength of the policy to guard against systemic risks, we expect it to be difficult for the land market to improve. However, the profit margins of the core land in the core cities have improved to a certain extent, and some relatively well-funded real estate enterprises have taken land against the trend, such as Longhu, China Resources, China Shipping and so on, laying an advantage in sales in 2022.

Director Bu periodic valuation to repair the real estate enterprise. The opportunity of the early plate policy game is gradually realized, under the fixed force of housing speculation, we think that looking for long-term valuation repair will become a strategy with a higher winning rate. In the context of "reversing the destruction of value and reshaping the forward valuation", we explain that the current low valuation of real estate enterprises is mainly due to the destruction of the long-term value, while the market may gradually clear and the profit margin of land ownership has improved to a certain extent. and under the background that the policy liberalizes the leverage restrictions on some real estate enterprises, the opportunity to excavate the long-term valuation repair appears. We recommend China Jinmao and Sunac China in Hong Kong stocks, benefit from Xuhui Holdings Group, recommend Zhongnan Construction, Vanke A, Poly Real Estate, Jindi Group, Merchants Shekou, etc., and at the same time recommend the property sector to benefit from the accumulated investment surplus and Country Garden Services Holdings. Recommend Zhonghai property, Baolong Commerce.

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