The profitability of low-and medium-credit companies finally began to be reflected in the 2021 annual report, and the performance of many enterprises dropped sharply or even lost money. We believe that the clear performance is also a sign that the competition pattern is beginning to become clear, and the advantages of high-credit companies in the balance sheet and profit statement begin to be fully reflected.
The problem of profitability has finally become apparent, and the overall growth of sector performance is not sustainable.
Many A-share real estate enterprises announced performance KuaiBao, most of which are lower than market consensus expectations, and some companies have seen a sharp decline in performance or losses, but the differentiation of enterprises is also very obvious.
Due to many factors, such as settlement structure, settlement scale, interest capitalization rate, cost ratio, preparation for falling price, and so on, although the cost of capital has theoretically perplexed the profitability of low-and medium-credit companies, there is no significant difference in performance growth among different credit companies. By early 2022, the problem finally became apparent.
The end of High Cash dividend of medium and low Credit companies
In the past few years, the amount of debt to be repaid by low and medium credit companies is much larger than the settlement net profit, but the companies continue to pay high cash dividends, which makes their cash flow more challenging.
We believe that the substantial decline in the performance of a large number of real estate enterprises at this stage (or even losses) objectively reduces the possibility of future cash dividends and capital outflows of these enterprises, better reflects the actual situation of enterprises, and also meets the demands of creditors.
The social image of real estate companies may change.
Historically, due to the lack of positive image-building ability of the industry, the brand department often stays at the "fire-fighting" level, and the social perception of real estate companies is not good. Relatively weak performance is objectively beneficial for real estate enterprises to reshape their image and carry out "weak communication", and to get rid of negative public opinion images such as "tycoon real controller" and "barbaric growing business empire".
Pay close attention to high frequency data
It is still in the off-season of the real estate push, but the push after March 2022 is expected to rise significantly, when the high-frequency data of the market is worth watching. We believe that March 2022 may be a bottom in terms of housing transactions.
The decline in performance is accompanied by valuation repair, and structural adjustment is accompanied by soft landing.
We believe that we will usher in a spring of downward revision of industry performance. For medium and low credit companies, the level of profit is no longer the key factor for enterprises to consider in the current period, the corporate balance sheet needs a long time to repair, the current stock price risk may still exceed the potential.
But for high-credit companies, the market share may increase, and the profitability advantage is also obvious. We recommend Poly Development, Vanke A (China Vanke), Longfor Group, China Resources Land, Binjiang Group, Jindi Group, Merchants Shekou and other companies.
Risk hint: the risk that a large number of real estate companies may underperform expectations. The risk that property sales will not recover in the spring of 2022.
Edit / Ray