I. recent situation of the industry

This week, the hang Seng real estate construction index closed down 0.58%, slightly outperforming the hang Seng index (- 0.83%), and the industry's relative income was 0.25%. 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 an excess return of about 8%.

Judging from the 35 stocks in the weighting index such as Fortune Real Estate (see schedule 1 for details), the top three stocks up this week are China National Building Material (+ 7.82 per cent), ESR Cayman Limited (+ 3.42 per cent) and China Resources cement Holdings (+ 2.67 per cent). The top three decliners were KE Holdings Inc. (- 7.80%), Country Garden Services Holdings (- 6.20%) and Yongsheng Life Services (- 5.55%).

According to the subdivision plate analysis, this week the construction materials in the earth production industry performed well, while the property management and development plate performed poorly as a whole.

Important developments in the industry: Anjuke, an open platform for real estate information and trading services in the same city, submitted its prospectus to the Hong Kong Stock Exchange on April 8, considering that it is an important player in China's real estate brokerage industry. in order to analyze the evolution of the competition pattern of the whole industry.

In addition, considering that the share prices of most companies in the high-profile property management sector showed a significant correction this week (4.5-4.9), especially the head property management companies, we will also interpret this and provide follow-up investment advice.

II. Views of the week

The traditional business boundary of the real estate brokerage industry has been broken, the new and old players have carried out mixed operation, the competition in the industry has intensified again, and the real estate planning agency has suffered the greatest negative impact.

The business scope of the real estate brokerage industry includes three major sectors, namely, new house sales business, stock housing sales business and housing rental business.

Traditionally, the competition pattern of the real estate brokerage industry is relatively stable, that is, A. The main participants in the new house sales business are real estate planning agents, such as 0733.HK, 2048.HK, 8376.HK, 002285.SZ, Tongze Real Estate Consulting (unlisted), etc. The main participants in stock housing sales and leasing business are generally offline brokerage companies, such as Lianjia, Central Plains Real Estate, I Love my Home (000560.SZ), Deyou Real Estate, 21st Century Real Estate, etc., online real estate marketing platforms, such as Anjuke, Q Fang.com (002377.SZ), Sanliuwu Amoy (300295.SZ), Fang Holdings Limited American Depositary Shares (SFUN.US), Leju Holdings Ltd (LEJU.US), and independent third-party brokerage platforms. Such as Fangdd Network Group Ltd. (DUO.US).

However, in recent years, the competition pattern of the industry has deteriorated seriously, which is specifically affected by the following factors:

• The Internet giant came out personally as a spoiler, making use of the advantages of flow, technology and capital to intervene in the new housing and stock housing brokerage business. Among them, BABA acquired 8.32% of the shares of E-House holding, jointly established Tmall good Housing, in order to the standard shell broker cooperation network (ACN), but also jointly built real estate transaction cooperation mechanism (ETC), deeply involved in the new housing marketing market. JD.com, not only promote new housing online sales business, but also use the "Haofang Jingxuan" brand to layout offline. By the end of October 2020, Haofang Jingxuan has opened more than 800 stores in Guangzhou, Dongguan, Huizhou, Tianjin and other places, including more than 500 in Guangzhou. According to JD.com official, Haofangjingxuan is its offline store to achieve online and offline integrated layout. As for Tencent, he indirectly intervened in the real estate brokerage business through equity investments such as KE Holdings Inc. and 58.com. Byte jump is wholly owned by the real estate trading platform "Happy Li".

• Traditional offline brokerage companies layout online platforms and seize a larger market share in the new home sales market by virtue of strong channels. KE Holdings Inc. is a typical representative. Up to now, it has become the largest real estate trading platform in China. No matter in the new house or stock housing trading market, the total transaction volume and market share of KE Holdings Inc. platform are far higher than those of other competitors. In response to the rise of KE Holdings Inc., its competitors also fought back. For example: central Plains Real Estate and Fangdd Network Group Ltd., follow the example of KE Holdings Inc. to establish a full-dimensional open service platform for the real estate brokerage industry-[original extraction of several acres of real estate]; 58 Anjuke of the same city to create a new housing transaction service platform-[58 Aijia].

• Real estate developers vigorously expand their own channels for new home sales, and enter the stock housing channel business. Traditionally, real estate developers will entrust the marketing business of new houses to third-party real estate planning agents, such as World Bank, E-residence Enterprise holding, and so on. However, with the increasing difficulty of the overall removal of commercial housing and the relatively limited flow that can be provided by third-party planning agents, marketing planning and real estate agency business are also easy to be replaced, superimposing the impact of COVID-19 's epidemic situation, leading to in recent years, new housing marketing is gradually breaking offline restrictions and gradually turning to the line, real estate developers are also making great efforts to expand their own channels for new home sales. Or give this business to the associated property management companies, activists such as Evergrande Group and even set up Fangche Bao Group to fully participate in the competition in the new housing and stock housing brokerage industry.

To sum up, the competition in the real estate brokerage industry, especially in the field of new home sales is becoming more and more fierce, on the one hand, it is affected by the mixed operation of companies in the industry, on the other hand, it is affected by disrupters, such as Internet giants, start-ups and other new competition. The most direct impact has two points: first, the new housing sales business of third-party real estate planning agents is gradually eroded, and the performance prospects of listed companies are not very optimistic; second, companies that really have core competitiveness (housing supply, leading assistance mechanism, number of brokers, number of offline stores, excellent and strong executive management, etc.), such as KE Holdings Inc., will gain a larger market share with the help of market-oriented competition.

III. Investment suggestions

Considering the obvious deterioration of the competition pattern of the real estate brokerage industry and the gradual erosion of the basic business of the third-party real estate planning agency company, we are more pessimistic about its future performance, so we suggest that investors should hold the real estate planning agency company cautiously. In addition, with the strong intervention of KE Holdings Inc. and other Internet giants, the traditional online real estate marketing platform will gradually lose its "traffic advantage" and most likely cause its online marketing business to face a lower revenue ceiling. Investors are also advised to avoid.

Finally, among all kinds of participants in the real estate brokerage industry, we are most optimistic about KE Holdings Inc., the core basis is that he has established the most powerful competition barriers on the housing source side (covering 226 million sets of real estate dictionaries), broker side (first in the industry), offline stores (first in the industry), industry assistance mechanism (as the industry infrastructure and ACN mechanism to significantly improve the efficiency of the industry). Internet companies Or the traditional offline real estate brokerage companies can not shake KE Holdings Inc. 's position in the industry, we are optimistic that KE Holdings Inc. in the real estate brokerage industry to get a larger market share. As for the impact brought by BABA and JD.com, it needs to be tracked continuously.

As for the property management sector of Hong Kong stocks, we believe that this round of market driven by optimistic performance guidance is coming to an end. Looking forward to the future, although we are still firmly optimistic about the future development of the property management industry, from a short-term perspective, based on the high valuation of the property management enterprises at the head of the industry, and most of them overdraw the performance of the next 1-2 years, it is suggested that investors should carefully chase high and pay attention to the odds. Please refer to the detailed analysis. "Futu Research | A brief comment on the recent trend of property Management Plate and follow-up Investment suggestions》。

IV. Risk hints

Macro-economic growth has slowed down; industry regulation and control policies have become stricter.

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