Core views:
In 2019, Zhengrong achieved sales of 13.7 billion yuan, an increase of 21% over the previous year. Among them, the Yangtze River Delta region, as a region with a traditional advantage, accounted for more than 50% of sales, rising for three consecutive years. In 2019, 5.6 million square meters of land storage were added, 85% of which were focused on strong second-tier cities, and future development is guaranteed. The net debt ratio was 75.2%, the same as last year, lower than the industry average, and due to a reduction in the financing ratio of other domestic loans, Zhengrong's average financing cost in 2019 was 7.5%, a decrease of 3 percentage points.
1. Sales volume in 2019 was 13.7 billion yuan, and the Yangtze River Delta region accounted for more than 50% of sales. Zhengrong Real Estate's sales scale in 2019 was 13.7 billion yuan, an increase of 21% over the previous year. The contract sales area in 2019 was 8.44 million square meters, an increase of 31% over the previous year.
From a regional perspective, on the basis of consolidating regions with traditional advantages such as the Yangtze River Delta and Haixi, Zhengrong focuses on the Bohai Rim and West China region. In 2019, the company's sales in the Yangtze River Delta region, West China region, Central China region, Bohai Rim region, West China region and Pearl River Delta region accounted for 55.2%, 24.2%, 9.6%, 7.2%, 3.5% and 0.3% of total contract sales, respectively. Among them, the company's sales share in the Yangtze River Delta region has been rising for three consecutive years, accounting for 45.2% and 52.7% in 2017 and 2018, respectively.
The sales share of the Bohai Rim region and West China increased significantly. Compared with 2018, the sales share increased by 1.6 and 1.7 percentage points, respectively. The Pearl River Delta region also provided sales revenue for the company in the first year, while the sales share of Haixi and Central China fell 1.6 percentage points and 4.5 percentage points, respectively, to 24.2% and 9.6%. Judging from this trend, Zhengrong's proposed strategy of deepening the development of the Yangtze River Delta, the Bohai Rim, the West China Sea, and the Midwest is gradually being implemented.
Furthermore, the Yangtze River Delta region is the main contributing region, accounting for more than 50% of sales. Sales mainly come from Suzhou, Nanjing, and Shanghai. These three cities account for 41% of total sales. Among them, Suzhou is the city that contributed the most to sales in the Yangtze River Delta region, accounting for 21.4% of sales, while Nanjing and Shanghai accounted for 15.7% and 3.9% of sales, respectively.
Zhengrong's sales target for 2020 is 140 billion yuan, an increase of 7.7% over the previous year. The supply in 2020 was 250 billion yuan. According to the removal rate of 60%, 2020 is likely to achieve the sales target of 140 billion yuan.
2. The “1+6+X” regional layout is gradually deepening. 85% of the new land storage is in terms of total land storage in strong second-tier cities. By the end of 2019, Zhengrong had 182 projects, with a total land storage area of 26.15 million square meters, an increase of 6% over the previous year, and a value of about 450 billion yuan, enough for the company to develop over the next three years. Among them, the Yangtze River Delta region accounts for 36% of land storage, the western region accounts for 29%, the central region accounts for 16%, the western region accounts for 6%, the Bohai Rim region accounts for 44%, and the Pearl River Delta region accounts for 51%. The “1+6+X” national layout (that is, one headquarters, six regions, and multiple projects) is gradually deepening.
In terms of additional land storage, 5.6 million square meters of land storage were added in 2019, and the additional land storage rights increased to 73% from 33% in 2018. The new soil storage is of excellent quality and cost-effective. Of the 41 new plots of land, 85% are in second-tier cities and 15% are in third-tier cities. Among them, second-tier cities are mainly core cities such as Nanjing, Suzhou, Hefei, and Xi'an. They have high market demand and strong risk resistance, which can effectively guarantee the continuous and steady expansion of the company's business scale and lay the foundation for future sustainable development.
Also in terms of future land acquisition strategies, although competition in the tendering market is fierce, liquidity is high, and turnover is fast. Therefore, in 2020, Zhengrong Land Acquisition will still be dominated by tenders, while adhering to 6 strategies: one is to continue the “1+6+X” national layout and deeply cultivate it to find benefits; second, insist on laying out first-tier and second-tier cities with good consumption capacity and high inclusiveness; third, to maintain rapid turnover and choose bidding projects in the core area of the city; fourth, mergers and acquisitions; fifth, continue to strengthen cooperation with each other and make strong alliances with each other; The sixth is to increase land reserves while controlling costs.
3. The net debt ratio remained around 75%, and financing costs fell to 7.5%. In 2019, Zhengrong's net debt ratio was 75.2%. It is basically the same as last year, lower than the average level of EH50 housing enterprises of 100.4%, and is at a steady level. The debt structure continues to be optimized. The cash to short-term debt ratio is 1.8 times, and short-term debt repayment pressure is less. Among them, short-term debt accounts for 34.2%, a decrease of 17.1 percentage points.
In terms of financing, Zhengrong's average financing interest rate in 2019 was 7.5%, down 0.3 percentage points from the previous year. The decrease in average financing costs was mainly due to Zhengrong's reduction in the financing ratio of other domestic loans in 2019. In 2019, Zhengrong's domestic financing accounted for 71%, of which other domestic loans accounted for 20%, a year-on-year decrease of 16 percentage points. Currently, the company still has sufficient financing lines. The total strategic credit limit is 244.9 billion yuan, of which the amount of foreign currency debt is 750 million US dollars, the amount of small public debt is 2 billion yuan, and it has reached strategic cooperation with many financial institutions.
4. Net profit increased 38.6% year on year, and there is plenty of room for profitability. In 2019, Zhengrong achieved operating income of 32.558 billion yuan, up 23.1% year on year, gross profit margin of 6.498 billion yuan, year-on-year increase of 7.9%, gross profit margin of about 20%, core profit margin of 2.9 billion yuan, up 42.7% year on year, core profit margin 8.9%, up 1.2 percentage points from 2018; net profit margin was 9.5%, up 1.1 percent from 2018 Percentage points.
In the future, with the gradual reduction of Zhengrong's high-cost old debt, there is still plenty of room for future gross profit margin improvement.