Core ideas:
After Shimao Group's sales exceeded 200 billion in 2019, the sales in 2020 reached a higher level and successfully exceeded 300 billion. Shimao Group also showed strong profitability in 2020. Its operating income and net profit show an increasing trend, and the gross profit margin is 29.3%, the net profit margin is 14.4%, and the gross profit margin and net profit margin are in the upper-middle level of the industry. In addition, Shimao Group replenished liquidity through the recovery of funds, share placement and spin-off property listing in 2020, while also increasing the owners' equity of the enterprise, which helped to optimize the financial quality of the enterprise. By the end of 2020, the relevant indicators of Shimao Group's three red lines have reached the standard, and green housing enterprises have added one more member.
First, the sales amount has exceeded 300 billion yuan, and sufficient land reserves have contributed to the sustained growth of the scale. Shimao Group, after the sales amount exceeded 200 billion in 2019, reached a higher level in 2020 and successfully exceeded 300 billion. Judging from the operating performance of Shimao Group in 2020, the growth rate of sales volume and sales area of Shimao Group in 2020 was higher than the average of the industry, with a growth rate of 15.5% to 300.31 billion yuan and a growth rate of 16.9% to 17.126 million square meters.
Under the adverse impact of the COVID-19 epidemic in 2020, Shimao Group's sales performance still maintained a strong growth trend, which has something to do with the enterprise's soil storage layout and soil reserves.
First of all, with sufficient land reserves in the Yangtze River Delta and Guangdong-Hong Kong-Macau Greater Bay Area, the real estate market in these two regions will recover faster and more resilient in 2020, which is conducive to the substantial release of sales performance. The Yangtze River Delta has always been a key development area of Shimao Group, so it has more land reserves in cities such as Nanjing and Hangzhou in the Yangtze River Delta. In addition, at the beginning of 2019-2020, Shimao Group acquired a lot of land in the Greater Bay area by strengthening the acquisition of land and diversified ways of acquiring land. By the end of 2019, Shimao Group's land storage value in the Yangtze River Delta and Dawan area was 330 billion yuan and 380 billion yuan respectively. Sufficient soil storage value and the great resilience of the real estate market in deep ploughing areas have helped Shimao Group to achieve sales growth under the impact of the epidemic.
Secondly, Shimao Group has a wide distribution of soil reserves, which helps to disperse the adverse effects of the epidemic. By the end of 2020, Shimao Group had laid out more than 100 cities. As we all know, at the beginning of the outbreak of COVID-19, the national real estate market was frozen, which had a great impact on the real estate market in various cities. Although the COVID-19 epidemic has been effectively controlled nationwide, it has broken out again in some areas, such as Beijing and Shijiazhuang. In this case, the nationalized distribution of soil reserves will help to weaken the impact of the epidemic.
By the end of 2020, Shimao Group has a land storage value of about 1.38 trillion yuan nationwide, of which the value of hot spots such as the Great Bay area and the Yangtze River Delta is 395 billion yuan and 345 billion yuan respectively. In addition, the land reserves in North China and Fujian are 250 billion yuan and 240 billion yuan respectively. Sufficient land reserve is the driving force for the enterprise to continue to grow in the future.
Second, profitability is in the forefront of the industry, controlling land acquisition costs and financing costs may be the main reason that Shimao Group has also shown strong profitability in 2020. During the reporting period, Shimao Group's operating income increased by 21% to 135.35 billion yuan. In terms of business, the carry-over area of property sales increased from 7.02 million square meters in 2019 to 8.31 million square meters in 2020, and the carry-over amount also increased by 20% to 126.13 billion yuan. Shimao Group spun off and listed property management in 2020, and its managed area and contract area increased significantly, which also led to a substantial increase in property management income. The COVID-19 epidemic in 2020 had a great negative impact on the hotel industry, and the income of the hotel industry generally declined. in this environment, Shimao Group's hotel operating income dropped by 650 million yuan. In terms of business operation, as Shimao Group opened a number of commercial projects in 2020, it led to an increase in commercial operating income.
In addition to the substantial increase in operating income, Shimao Group's net profit has also increased, and gross profit margin and net profit margin continue to remain at the upper level in the industry.
Specifically, Shimao Group's gross profit margin was 29.3% and net profit margin was 14.4% in 2020. From the housing enterprises that have issued the 2020 annual report, it is easy to find that some housing enterprises have a certain decline in gross profit margin and net profit margin due to the gradual carry-over of high land price projects acquired in 2016-2018, or due to factors such as price limits. in this case, it is expected that the profitability of the industry may continue to decline in 2020. However, according to the relevant data of Shimao in 2020, its gross profit margin is basically the same as that of the 2019 E50 gross margin of 29.93%, and the net profit margin is slightly higher than the E50 average of 13.98%, which further reflects its strong profitability.
We believe that Shimao Group's excellent profit performance may be due to the following reasons: first, on the investment side, enterprises pay attention to control the cost of obtaining land, so that there is a large difference between the cost of land acquisition and the average price of sales, and there is sufficient profit space. Second, enterprises pay attention to financial control, which also makes the financing costs of enterprises continue to decline. Real estate as an asset-intensive industry, low-cost access to funds will help enterprises to save financial costs and enhance their profitability.
Third, continue to optimize financial indicators and add one more member to green housing enterprises
In 2020, Shimao Group further optimized its financial quality through a variety of measures. After the introduction of the three red line policies in the second half of 2020, the growth rate of interest-bearing liabilities of real estate enterprises is linked to the three major financial indicators of enterprises, and the space for the use of financial leverage of real estate enterprises is limited, prompting enterprises to pay attention to endogenous repayment for development and ensure the safety of cash flow. Shimao Group achieved a rebate of 225.2 billion in 2020, helping to replenish liquidity. In addition, Shimao Group replenished funds and increased owners' equity through placing in January and April 2020 and the listing of Shimao Services in October. Under a series of measures, Shimao Group's monetary funds (including restricted funds) increased by 15% by the end of 2020, owners' equity increased by 31%, and the net debt ratio fell to 50.3%. Excluding prepaid accounts, the asset-liability ratio has also fallen within the red line. In addition, under sufficient monetary funds, the cash and cash equivalents of enterprises are higher than short-term interest-bearing liabilities, and the risk of short-term debt is smaller.