I. recent situation of the industry

This week, the Hang Seng property construction index closed up 1.76%, slightly losing the Hang Seng Index (+ 2.13%), and the industry's relative income was-0.37%. However, according to the cumulative income so far from the beginning of the year, Hang Seng property construction industry has substantially outperformed the Hang Seng Index, with excess earnings approaching 7.8%.

Judging from the 35 stocks in the weighting index such as Fortune Real Estate (see schedule 1 for details), the top three stocks that have risen this week are Greentown Services (+ 36.83%), China National Building Material (+ 9.11%) and KE Holdings Inc. (+ 8.04%). The top three decliners were China Vanke (- 5.97%), Jinke Services (- 5.55%) and China Resources Land (- 4.98%).

According to the sub-plate analysis, the building materials and heavy infrastructure in the real estate industry this week performed well, while the individual stocks of property management and development plate showed great differentiation.

Important developments in the industry: head housing enterprises such as Vanke, Evergrande, Country Garden Holdings, Rongchuang, Longhu and so on have all disclosed their 2020 annual reports in the past two weeks. Through the financial report, in addition to announcing results, housing companies also release enough signals to the outside world, such as diversified business progress, leverage reduction and so on. The following is the interpretation and comments on the 2020 annual report of the head real estate enterprises.

II. Views of the week

The head housing enterprises are diversified, and the second growth curve is gradually highlighted. As the national real estate development industry has gradually entered the stock era, in order to open up the second growth curve, the head real estate enterprises have increased their diversification. Take the four major housing enterprises "Biwan Hengrong" as an example to observe the diversified business progress of real estate enterprises.

• Country Garden Holdings: diversified business is mainly robot + modern agriculture. According to the latest annual report, it is developing 46 types of construction robots, most of which are commonly used in cast-in-place concrete and prefabricated construction, of which 18 construction robots have been put into commercial application. As of February 2021, the company's Bozhilin robot has been piloted in more than 15 projects, with a total construction area of 800000 square feet. The company also lays out "agricultural chip", focuses on "smart farm", and carries out industrial chain investment to promote the development of agricultural modernization. In addition, the company also released the construction robot and robot restaurant business, which is expected to be fully profitable next year.

• Vanke: diversified business is mainly property management, long-term rental apartments, logistics real estate and so on. According to the most New year's report, in terms of property management, the company upgraded the brand Wanwuyun to achieve revenue of 18.204 billion yuan in 2020, + 27.4% year on year, and still maintain the leading position of domestic property management in terms of management area of 566 million square meters. In terms of long-term rental apartments, revenue reached 2.54 billion yuan in 2020, + 72.3% compared with the same period last year, with a total opening of 142,400, the scale of centralized apartments ranked first in the country, and the overall occupancy rate was more than 95%. In terms of logistics, 1.95 million new businesses were opened in 2020, with a total of 7 million, making it the largest cold chain logistics integrated service provider in China.

• Evergrande: the diversified business layout is the most radical, covering clothing, food, housing, transportation, culture, travel, recreation and other areas. Its diversified platforms include China Evergrande New Energy Vehicle, Evergrande Property Services, Hengteng network, saloon car treasure, Evergrande child world, big health and Evergrande Bingquan.

• Financing and innovation: the diversified business layout focuses on property management, culture and tourism and cultural fields. Sunac Services of the property management plate will achieve revenue of 4.623 billion yuan and net profit of 626 million yuan in 2020, while culture and travel plate will achieve revenue of 3.88 billion yuan and net profit of 627 million yuan in 2020. At present, Rongchuang Wen Tour has become the largest indoor ice and snow operator in the country. As for Fuchuang Culture, the overall performance is also good, with the current layout of seven major animation studios and stable output of high-quality content projects, such as co-produced films "Bear haunts the Wild mainland" and "assassination of the novelist" grossed more than 575 million and 983 million, respectively.

To sum up, for many housing enterprises that implement the diversification strategy, in view of the good development of Vanke's diversified business, the industry status ranks first in the country, and matches the core main business, we are relatively optimistic about Vanke.

III. Investment suggestions

Considering the marginal changes in fundamentals and the two dimensions of industry valuation, based on the "three red lines" of the head housing enterprises, the "three red lines" basically meet the standards, adhere to high dividends, the debt ratio decreases significantly, commercial housing sales still maintain medium-and high-speed growth, and the valuations of plates and individual stocks are at the bottom of history.We believe that the market is excessively pessimistic about the real estate development sector, robust leading real estate enterprises may have poor expectations, and recommend investors to focus on Vanke, Country Garden Holdings, Longhu and China Resources Land.

IV. Risk hints

Macroeconomic growth slows; industry regulation and control policies tighten; liquidity tightens; company sales fall short of expectations

V. Appendix

Table 1: 35 constituent stocks of Fu Tu Real Estate Equal weight Index

Table 2: performance and valuation of each segment leader of Dazhou plate this week