Core ideas:

At the beginning of 2020, China Evergrande Group began to change the mode of development and comprehensively implement the development strategy of "high growth, scale control and debt reduction". In terms of high growth, Evergrande achieved contract sales of 723.2 billion yuan in 2020, an increase of 20% over the same period last year and 111% of the sales target of 650 billion yuan. In terms of scale control, the company has a total land reserve of 231 million square meters in 2020. On the basis of promoting sales, the total land reserve decreased by 21.2% compared with the same period last year. In terms of debt reduction, the company's total interest-bearing liabilities decreased by 10.4% in 2020 compared with the same period last year, and three red lines are planned to turn green in 2022. In the future, under the development strategy of "high growth, controlling scale and reducing debt", China Evergrande Group may achieve sustained, steady and healthy development.

Contract sales of 7232 yuan, achieving 111% of the sales target

In 2020, China Evergrande Group achieved contract sales of 723.25 billion yuan, an increase of 20 percent over the same period last year, and achieved the sales target of 650 billion yuan. The proportion of sales contributed by the Yangtze River Delta and Pearl River Delta regions has increased, and the regional distribution of the company's sales is more balanced than in 2019.

Second, investment is biased towards first-and second-tier cities, and low-cost increases profit margins. Although China Evergrande Group has achieved a nationalized layout, the company's investment focus is still based on first-and second-tier cities with sufficient housing demand and a more active market. We believe that the main reasons why the company may achieve higher sales growth and profit margins in the future are:

First, the land cost of the company is relatively low, the average floor price of the existing total land reserve is 2120 yuan / square meter, and the average floor price of the new land reserve is 1992 yuan / square meter in 2020; second, there is a large market space in first-and second-tier cities. Evergrande maintains the tendency to invest in first-and second-tier cities, which is conducive to the sales of the company's projects, promote long-term and stable growth, and promote the company's smooth "high growth" development strategy.

Third, the debt reduction has achieved remarkable results. It is expected that the three red lines will turn green in 2022. By 2020, the company's total interest-bearing liabilities will decrease by 10.4% compared with the same period last year. The company aims to achieve the "three green lines" by 2022. We believe that, on the one hand, debt reduction can optimize the company's debt structure, improve short-term and long-term solvency, optimize financial leverage, improve the company's credit rating, and reduce the cost of capital use in the future; on the other hand, debt reduction requires companies to strengthen control over the scale of land acquisition, to sell and determine investment, to improve the efficiency of the use of corporate funds, and ultimately to promote the company's size and profits.