Core views:
In the first half of 2022, Zhongnan overcame sales challenges and worked hard to guarantee delivery and payment. In terms of guaranteed delivery, the company delivered 57 projects in the first half of the year, and will continue to advance in the second half of the year to enhance the recovery of market confidence in the enterprise; in terms of guaranteed payments, various public debts were paid on time, and net operating cash flow was positive for many years in a row, cooperating with AMC institutions to enhance resilience to risks.
1. The distribution of sales was concentrated in Jiangsu, Zhejiang and Lu. Delivery continued to be strengthened in the second half of the year. In the first half of 2022, the real estate business in Zhongnan achieved sales of 33.1 billion yuan and achieved a sales area of 2.676 million square meters. Judging from the distribution of sales, the company's sales share is concentrated in Jiangsu, Zhejiang and Shandong regions, with sales amounts of 9.88 billion yuan, 6.87 billion yuan and 3.05 billion yuan respectively. Guaranteed delivery will be one of the focus of the company's work in the second half of the year. We believe that it will not be easy for Zhongnan to work hard to secure the building in the current market environment. Continued performance such as safe cash flow, on-time delivery, and debt repayment will not only bring confidence to the owners, but also boost industry confidence.
2. Performance growth is limited, focusing on stable operations in the short term
The company achieved revenue of 24.13 billion yuan in the first half of 2022, with a gross profit margin of 9.7%. Due to the decline in revenue, although sales expenses decreased by 250 million yuan, the expense ratio increased to 3.36% year on year; although management expenses decreased by 4.6 billion yuan, the management expenses rate increased to 4.81% year on year. In order to guarantee project delivery and debt payment, the company's work focus is more focused on safety. Performance is expected to pick up only when business conditions are stabilized and residents' and investors' confidence is strengthened.
3. Further promote insurance payments and further broaden financing channels
Zhongnan's interest-bearing debt in the first half of the year was 51.17 billion yuan, down 17.6% from the beginning of the year. The company has monetary capital of 16.32 billion yuan, a net debt ratio of 85.2%, and a balance ratio of 79.1% after deducting prepaid accounts. Against the backdrop of continued sluggish sales and poor financing channels, Zhongnan Construction balanced capital pressure and operational risk through cash flow management. In the first half of the year, operating cash flowed in 46.77 billion yuan, and net cash flow from operating activities was 4.81 billion yuan, an increase of 99.4% over the previous year, and remained positive for 5 consecutive years. This will further support the company's ability to guarantee payments and strengthen its resilience to risks.