Core views:
In 2019, the company achieved sales amount of 16.8 billion yuan, an increase of 2.1% over the previous year, maintaining steady growth, with Shenzhen project sales accounting for 80%; by the end of 2019, the total construction area of the company's land reserves was 4.38 million square meters, sufficient for years to come; in 2019, the net debt ratio fell further by 13.5 percentage points to 40.7%, financing costs also fell 0.1 percentage points to 4.7%, and the capital advantage of state-owned enterprises was obvious; the company's gross profit margin remained around 34.5%, net profit margin was 29%, and profitability was compared to the industry Excellent level. In the next five years, the company will strengthen its resource acquisition capabilities and professional operation capabilities, and be more aggressive in increasing land reserves and contract sales.
1. Sales remained stable. The Shenzhen project accounted for 80% of sales. In 2019, Shenzhen Holdings achieved contract sales of about 16.8 billion yuan, an increase of 2.1% over the previous year. The contract sales area was about 490,000 square meters, a decrease of 17% over the previous year. With the central location of sales projects and excellent quality, the average sales price in 2019 was 34,426 yuan/square meter, an increase of 20% over the previous year. Among them, 68% of sales came from residential projects, 80% of sales came from sales projects in Shenzhen. High-quality projects such as Shenye Zhongcheng, Qianhai Yiwan Palace, and Tairan Licheng are popular in the market. On the day of opening, all of Shenye Midtown were sold out; Qianhai Yiwan Province opened and eliminated 90%, achieving contract sales of 4.07 billion yuan; Tairan Licheng achieved bulk sales of about 3.14 billion yuan despite the declining office market and tight financial resources for institutional customers.
In 2019, the company carried forward property sales area of about 519,000 square meters, up 30.1% from 2018; achieved net property sales revenue of about 9.261 billion yuan, down 2.7 billion yuan from the previous year, and gross margin of real estate development and sales was 37%, a decrease of 3.2 percentage points; in 2020, due to the epidemic, some Shenzhen holding projects will be postponed to 2021, and the adjusted sales value in 2020 will remain the same as in 2019.
2. Land storage focuses on the Greater Bay Area, and future investment attitudes will be more aggressive
In 2019, the company added a total land reserve of about 220,000 square meters, a year-on-year decrease of 65%. In 2019, the company's area-to-sales ratio was 0.45, less than 1, and the investment strength was weak; by the end of 2019, the company's total land reserve construction area was about 4.38 million square meters, a year-on-year decrease of 30%. The total land reserve construction area can guarantee development for years to come.
Since the company proposed a strategic layout focusing on the Greater Bay Area in 2017, it has continued to obtain land projects in the Greater Bay Area through various methods, and has successively disposed of inefficient projects located in third- and fourth-tier cities to optimize the asset structure. By the end of 2019, the company's land reserves in the Greater Bay Area accounted for about 51% of the planned construction area, and the land reserves of Tier 1 and 2 cities accounted for 51%. The company had sufficient land reserves in Tier 1, 2, and the Greater Bay Area to guarantee future development.
Affected by the pandemic in 2020, the downturn in the real estate industry is expected to continue for some time. With market competition weakening, it is also a good opportunity for Shenzhen Holdings to obtain high-quality assets. Therefore, in 2020, Shenzhen Holdings will adopt an active investment trend, give full play to its capital advantages, and increase investment in Shenzhen, the Guangdong-Hong Kong-Macao Greater Bay Area and core Tier 1 and 2 cities.
3. The net debt ratio fell 13.5 percentage points. The financing cost advantage was obvious. By the end of 2019, the net debt ratio of Shenzhen Holdings (including all interest-bearing liabilities) was 40.7%, down 13.5 percentage points. Financial leverage was at a low level in the industry, and was becoming more and more stable. In 2019, the company's total bank and other loans were $22.24 billion, up 6.1% year on year, and cash balance (including restricted cash) was approximately $11.324 billion, down 2.28% year on year. The decline in net debt ratio was mainly due to an increase in the company's shareholders' equity.
As a real estate development company under the Shenzhen State-owned Assets Administration Commission, Shenzhen Holdings has the advantage of low financing costs of state-owned enterprises. Financing costs remained at a low level of 4.7% in 2019, down 0.1 percentage points from 2018. In a situation where the current industry situation is severe, with the financial advantages of stable financial leverage and low financing costs, there is still room for the company's future development.
4. The net profit margin is 29%, and the profitability is far higher than the EH50 average. In 2019, the company achieved operating income of about 13.6 billion yuan, a decrease of 10% over the previous year, of which net sales revenue was 9.261 billion yuan, a year-on-year decrease of 12.7%. Due to factors related to settlement rhythm, property sales revenue declined in 2019.
In 2019, the company's gross profit was about 4.69 billion yuan, and the gross profit margin was 34.5%, higher than the average of 32.61% of EH50 real estate companies. Among them, the gross profit margin for development and sales was 37%, and the gross profit margin for property investment reached 68%.
In 2019, the company achieved net profit of 4.06 billion yuan, an increase of 18.3% over the previous year. The net profit margin was 29%, an increase of 6.8 percentage points, far higher than the EH50 average of 14.8% for real estate companies. There are two main reasons for the high net profit margin. First, fair value increased by 216.5% to 877 million yuan after being transferred to investment properties in 2019; second, income tax expenses decreased. In 2019, corporate income tax expenses were 2.111 billion yuan, a decrease of 25.7% over the previous year. Furthermore, the company's core profit was 2.8 billion yuan, down 2.8% from the previous year. The reason for the decline was that Evergrande's shareholders' dividends of 780 million yuan could not be included in the investment income of that year in 2019.