Introduction to this report:
China Construction's new signings increased 23% in April, including an increase of 183% in infrastructure business. Zhonghai Real Estate's cumulative equity sales for the first 4 months of 2024 were 77.08 billion yuan, -30% year-on-year, ranking 1st, up 1 place from the previous year.
Incidents:
China Construction released the “Business Situation Briefing for January-April 2024".
Commentary:
The state introduced a policy to absorb real estate inventories and guaranteed housing, and it is expected that it may continue to be implemented before the Third Plenary Session of the Central Committee. (1) The central bank has set up 300 billion yuan of affordable housing reloans to support local state-owned enterprises to buy commercial housing that has already been built and not sold at reasonable prices for use as allotment or rental affordable housing, which is expected to drive 500 billion yuan in bank loans. (2) Reduce the minimum down payment ratio for personal housing loans at the national level, adjust the minimum down payment ratio for the first home from no less than 20% to no less than 15%, and adjust the minimum down payment ratio for the second home from no less than 30% to no less than 25%. (3) Abolish the lower limit of interest rate policies for personal housing loans at the national level. Interest rates for first and second home loans are no longer set lower policy limits, so mortgage interest rates can be marketed. (4) Reduce interest rates on housing provident fund loans of various maturity types by 0.25 percentage points.
The policy catalyst compounded the decline in the 2023 base, and real estate fundamentals are expected to narrow and improve sequentially in the future.
(1) The year-on-month decline in real estate investment in April was 0.5 percentage points higher than the previous month, the -22.8% drop in sales area increased 4.6 percentage points month-on-month, and sales volume decreased by -30.4% year-on-month, up 4.5 percentage points month-on-month. (2) In April, sales prices of newly built commercial residential homes in first-tier cities fell 0.6% month-on-month, and increased 0.5 percentage points month-on-month. The second- and third-tier declines of 0.5% and 0.6%, respectively, increased 0.2 percentage points month-on-month. (3) In April, the new construction area decreased by 11.4 percentage points month-on-month to -14.0%, the construction area increased by 19.4%, improved 35.9 percentage points month-on-month, and the completed area decreased by 2.6 percentage points month-on-month to -19.1%. (4) The area of commercial housing for sale increased by 15.7% at the end of April.
China Construction increased 12% in the first 4 months of 2024, and Zhonghai Real Estate ranked first in equity sales in the first 4 months.
(1) From January to April 2024, the total number of new signings of 1478.5 billion yuan increased 12%; in April, the new signing of 290 billion yuan increased 23%, of which the construction industry was 262.9 billion yuan (+35%), housing construction remained flat year-on-year (59% of the construction industry), and the 102 billion yuan infrastructure increased by 183% (41% of the construction industry). (2) In April, real estate contract sales of 27.2 billion yuan decreased 35% year-on-year, and the newly started/completed area of 189,5/15.46 million square meters increased by 18/7%. According to China Index data, Zhonghai Real Estate's equity sales in April were 20.49 billion yuan, -47% month-on-month, and -37% year-on-year; cumulative equity sales for the first 4 months of 2024 were 77.08 billion yuan, -30% year-on-year, ranking first, up 1 place from the previous year. (3) From January to April 2024, new domestic signings of 1.3 trillion yuan in the construction industry increased 15%, and new overseas signings of 72.9 billion yuan increased by 114%.
Maintain the highest global credit rating in the industry, with a valuation of 0.56 times PB and 4.2 times the historical bottom of 2024PE.
(1) Maintain the forecast for 2024-2026 EPS1.40/1.48/1.55 yuan, an increase of 7%/6%/5%, and maintain the target price of 8.16 yuan, corresponding to 5.8 times PE in 2024. (2) It is one of the longest professional development groups in China, the earliest market-based operation, the highest degree of integration, and the largest investment and construction group in the world. (3) The three major international rating agencies, S&P/Moody/Fitch, rated the company A/A2/A, and continued to maintain the industry's highest credit rating in the world. (4) The current dividend rate is 4.34%, PB0.56 times the 10-year historical fraction is 6%, and 2024PE 4.2 times the ten-year historical fraction is 28%. (5) For the 18th time in 2023, it was rated A by the State Council's State-owned Assets Administration Commission in the annual assessment.
Risk warning: real estate policy risk, inventory impairment risk, investment project impairment risk, etc.